Buy Now, Pay Later regulation is on the horizon, with the UK government planning to bring new rules into effect in 2026. While BNPL has provided shoppers with greater flexibility, the lack of oversight has raised concerns about consumer protection. The proposed changes aim to create a fairer and safer environment, reducing the risk of debt traps.
What is BNPL?
Buy Now, Pay Later (BNPL) services let shoppers split payments for purchases into smaller, interest-free instalments. Providers such as Klarna and Clearpay have made BNPL a go-to payment method, especially for online shopping. Its ease of use and zero upfront costs have driven BNPL’s rapid growth in the UK, with millions using it to manage their spending.
Why is regulation needed?
While BNPL can be helpful, it is unregulated. And that poses risks. Without the checks and balances applied to other credit products, people are more likely to:
- Overextend themselves financially due to a lack of affordability assessments.
- Be unaware of hidden fees or penalties for missed payments.
- Fall into spiralling debt by stacking multiple BNPL agreements across different providers.
A report by Citizens Advice found many BNPL users struggled to keep up with repayments, highlighting the urgent need for consumer protections.
“Almost two in five (5.7 million) who’ve used Buy Now Pay Later in the last year didn’t think it was ‘proper borrowing’ and six million didn’t fully understand what they were signing up for.”
Citizens Advice
What changes are being proposed?
- Mandatory credit checks to assess affordability and ensure responsible lending.
- Clearer terms and conditions so consumers fully understand their repayment obligations.
- Greater transparency regarding fees, interest, and penalties for missed payments.
- The ability to escalate complaints to the Financial Ombudsman Service.
It is hoped that these measures will give consumers the same level of protection as traditional credit products, ensuring they can make informed financial decisions.
Implications for shoppers and businesses
For consumers, these regulations mean better protection against financial harm. The focus on affordability assessments and transparency will reduce the risk of unexpected debt, enabling them to manage BNPL responsibly.
For businesses offering BNPL services, the changes will require adjustments to ensure compliance with FCA rules. This could include implementing robust credit-check systems, providing clearer communication about repayment terms, and training staff to support responsible lending.
What you can do now
- Budget carefully: Only use BNPL for purchases you can comfortably afford to repay.
- Track agreements: Keep tabs on how many BNPL instalments you have running to avoid overspending.
- Read the terms: Understand the repayment timeline, late fees, and other conditions before using BNPL.
- Prioritise repayments: Missing payments can impact your credit score, so stay on top of your instalments.
Stay informed
Consumer protections are evolving, and these regulations will make BNPL safer for all. To stay updated on financial justice issues like this, sign up for our newsletter and we’ll keep you informed.
