New buy now, pay later rules confirmed – will they protect you?
Buy now, pay later borrowers are set to gain stronger rights and clearer information when they access short-term lending.
Millions of shoppers are set to be protected by new regulations on buy now, pay later (BNPL) services from next week.
From 15 July, new rules set by the Financial Conduct Authority will give buy now, pay later (BNPL) customers more rights and clearer protections.
Providers will become subject to the FCA’s regulation, meaning they will need to abide by stricter rules when lending.
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BNPL services are increasingly popular, especially for those who shop online, with the FCA estimating 11 million people in the UK the payment method.
The largest providers in the UK include Klarna, Clearpay, PayPal’s pay later service, and Zilch.
The FCA said the BNPL sector provides an important source of credit for many who want to access it, but found there are no protections in place for those who use it repeatedly or are unable to afford it.
Here is what the changes will mean for you.
BNPL lenders must be regulated
From 15 July, all BNPL or deferred payment credit (DPC) lenders will need to be authorised by the FCA or part of its temporary permissions regime.
You will be able to check whether a firm can offer these credit agreements on the FCA Firm Checker.
There are some limits to how the regulation works though.
Any BNPL agreement you take out before 15 July 2026 will remain unregulated and the new protections won’t apply to these agreements.
Tougher affordability checks
Using a BNPL service can make sense for those who want to spread the cost of a large purchase into smaller, monthly instalments, but it has left some people borrowing more than they can afford and often getting caught out by late fees and interest payments.
Under the new rules, BNPL lenders will be legally obliged to carry out affordability checks on borrower’s income and spending if they have a poor credit history before allowing them to take out a short-term BNPL loan.
Transparent information
As with other financial agreements, BNPL lenders will need to give you clear information on the amount you are borrowing, how much you will repay and when it is due, plus any late fees and interest that could be owed.
Better customer support
BNPL lenders will also have to be more supportive if you are struggling with repayments.
If you miss a repayment, firms will need to contact you to let you know and explain what this means and offer support if you are struggling.
Right to complain
One of the main benefits of BNPL being regulated is that consumers will have the right to complain if something goes wrong such as if you think you have been mis-sold.
Similar to other financial products, you will be able to complain to the lender first and if you are dissatisfied you can take your issue to the Financial Ombudsman Service.
Do the new regulations go far enough?
While many have welcomed the new regulations, saying they will help make BNPL lending fairer, some worry the new regulations do not go far enough.
Greg Davies, from behavioural finance firm Oxford Risk, said while the new regulation is welcome, it fails to fully deal with other structural issues within the BNPL sector.
He said: “Affordability checks based purely on patchy credit histories are necessary but reactive. Behavioural signals such as repeat usage, stacking across providers, or escalating short-term commitments can indicate vulnerability earlier than traditional credit data.
“The right goal is proportionate protection: preserve flexibility for those using the product responsibly, while introducing clearer visibility and friction where patterns suggest mounting risk. That is how you protect consumers without killing innovation.”
Meanwhile, Alastair Douglas, chief executive of fintech TotallyMoney, warned that when the new regulations come into force, some consumers may look for riskier credit elsewhere.
He said: “Regulating Buy Now Pay Later is a positive step, but one which is long overdue. Analysts estimate that up to a third of current BNPL users could lose access once the new rules kick in – which tells you just how many people have already been borrowing without the proper safeguards.
“The problem the government and regulator face next is what fills the BNPL gap once lending is tightened up. If people who’ve relied on it for so long suddenly find themselves locked out, they’ll start to look for credit elsewhere – which could push the vulnerable into the arms of unregulated and illegal lenders.”
