The UK’s financial watchdog has issued a warning to companies offering “buy now pay later” schemes that they could be committing a criminal offence over misleading and harmful adverts.

“Buy now pay later” adverts – which allow consumers to buy products on credit and pay for them at a later date – could be misleading consumers by failing to warn of the risks of taking on debt they cannot afford to repay, the Financial Conduct Authority (FCA) said.

The FCA raised concerns over financial adverts on websites and social media, including “influencers” promoting such products, that could be breaching regulatory rules.

Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions

The warning comes after supermarket giant Iceland announced its own interest-free loans options earlier this week, which it claimed would help shoppers with their food shop amid the worsening cost-of-living crisis.

But the chain faced backlash over the move, with MP Stella Creasy criticising Iceland for “exploiting” customers and failing to protect them if they build up debt, she said in a Tweet.

In a statement on Friday, the FCA reminded retailers that they must comply with financial promotion rules or they risk committing a criminal offence.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services.

“Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions.

“It is vital that adverts are clear, fair and not misleading.”

Some adverts could fail to warn consumers of the consequences of missed payments, the impact on people’s credit scores, and not make clear when charges become payable, the FCA said.

People who opt to “buy now pay later” could face late fees if they miss a repayment with some providers, or a dent in their credit rating if details of missed payments are reported to credit agencies.

The FCA said it will use criminal and regulatory enforcement powers if it finds promotions are not complying with its rules.

Action from the regulator has already led to 4,226 promotions being changed or withdrawn this year.