New rules to protect Buy Now, Pay Later (BNPL) customers have been finalised, the Financial Conduct Authority (FCA) has announced. The rules will come into force from 15th July 2026 to protect the 11 million people who use BNPL services, which are currently mostly unregulated.
The plans were first revealed last summer, with the FCA announcing a series of proposed restrictions to BNPL and launching a consultation process. The result of that consultation process has been, after pressure from some BNPL providers, to weaken some of the planned protections contained in the initial launch last year. However, most of the key regulations remain part of the new rules.
Sarah Pritchard, deputy chief executive of the FCA, said: "We want the Buy Now Pay Later sector to thrive - it provides an important source of credit to many - and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they're unable to repay, because that could worsen their financial situation. Now Parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it."
What is Buy Now, Pay Later?
Buy Now, Pay Later is a booming credit industry that has jumped from £60m of lending in 2017 to £13bn in 2024, according to the FCA. BNPL services allow consumers to spread the cost of what they are buying, instead of paying for a purchase all in one go.
The short-term instalments do not usually incur interest charges, but borrowers can be hit by significant late fees that are made more likely by the current lack of a requirement to run affordability checks on applicants. Financial education charity the Centre for Financial Capability commissioned research that found almost a quarter of BNPL debt incurred late repayment fees in the six months to December 2023.
Critics of the industry argue that as long as Buy Now, Pay Later is not regulated by the FCA, many consumers will find themselves largely unprotected when issues arise. Some may not even have realised that they were taking on debt in the first place.
BNPL is an increasingly popular system, with an estimated 11 million people in the UK having used BNPL in the last year, climbing by two million in the past three years, according to research carried out by the FCA. It is now commonplace to see big BNPL firms such as Clearpay or Klarna alongside standard payment options on online checkout pages.
The previous government announced plans to regulate BNPL as far back as 2021 and began a consultation period on new legislation in 2023, but the industry will remain unregulated until July.
What are the new Buy Now, Pay Later regulations?
From 15th July 2026, Buy Now, Pay Later firms will need to be FCA-authorised. In order to get FCA authorisation, they will need to offer customers:
- Clear information - Consumers will get key details about their agreement upfront, including when payments will be due, what the payment amounts are, and what happens if they miss a payment. However, as a result of changes made during the consultation process at the request of BNPL firms, customers will not be told about their withdrawal and cancellation rights in the credit agreement, their right to complain to the Financial Ombudsman Service (FOS), or the lender’s ability to directly take money from their account.
- Affordability checks - Lenders will have to carry out "proportionate" affordability checks to ensure customers can afford to repay what they borrow. This will apply to every purchase of any value, not just when a customer first opens their account. However, the FCA has declined to set rules on how these affordability checks will work, instead issuing guidance and committing to monitoring firms' processes. This means BNPL affordability checks could vary from provider to provider.
- Complaints and compensation - Consumers will be able to complain to the Financial Ombudsman Service (FOS) if something goes wrong and the relevant BNPL provider is unable to resolve the issue. The FOS will determine if the customer has been treated fairly or not.
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Missed repayment support - BNPL providers will need to explain the consequences of a missed repayment, what is now owed and how to resolve the issue. Customers in financial difficulty will be directed to free debt help services, and the provider will need to consider adjusting the repayment period or reducing fees to help the customer repay their debt.
Once the new rules come into effect on 15th July, BNPL consumers will also benefit from section 75 protection for the first time. Section 75 of the Consumer Credit Act 1974 makes a credit provider jointly liable with the retailer if something goes wrong with a purchase costing more than £100 but less than £30,000. Currently, a BNPL firm is not considered to be credit provider under section 75, unlike credit card companies, but this will change for new BNPL agreements made from 15th July 2026. Keep in mind that this means BNPL purchases made before this date will not be protected under section 75.
Is Buy Now, Pay Later the best way to spread the cost of a purchase?
Buy Now, Pay Later is, initially at least, a very easy-to-use credit system that is often built into online retailers' customer journeys. This can make it a good way to spread the cost of a purchase, but can also make impulse buying easier and problem debt more likely. The new protections should help consumers use BNPL more safely, or avoid it altogether if it's not the right option.
Depending on the situation and the type of spending you are looking to do, you could consider a credit card with 0% interest offers on purchases and/or balance transfers instead. The best deals let you spread payments over 2 years without incurring interest.
You can read more about BNPL in our article ‘What is Buy Now, Pay Later?’ and explore more credit card options on our 'Best credit cards in the UK' page.
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