From today, 15 July 2026, many 'buy now, pay later' (BNPL) products are subject to regulation by the Financial Conduct Authority (FCA), marking a significant shift in consumer protection for a widely used payment method. This move comes after growing concerns about consumers potentially falling into unmanageable debt without adequate safeguards, a situation highlighted by various investigations over recent years.
BNPL services, offered by providers such as Klarna and Clearpay, have become a popular way to spread the cost of purchases interest-free over short periods, whether for clothing, furniture, or technology. FCA data indicates that one in five UK adults, equivalent to 10.9 million people, utilised a BNPL product at least once in the year to May 2024, a notable increase from 17% in 2022. However, these short-term credit options previously lacked the same consumer protections found with other forms of borrowing, like credit cards.
A key change under the new rules is the requirement for BNPL providers to conduct affordability checks before approving any agreement. While the level of scrutiny will be proportionate to the borrowed amount, providers must now ensure that applicants can genuinely afford to repay what they borrow. This addresses previous concerns that many BNPL users did not fully realise they were taking on debt or understand the potential consequences of missed repayments, which can include late fees and adverse impacts on credit scores.
Furthermore, consumers will now receive clearer information upfront about their BNPL agreements. This includes essential details such as the total cost, repayment schedules, consequences of missed payments, and whether a credit check will be performed. Crucially, information regarding rights to withdraw, cancel, pay off early, and complain to the Financial Ombudsman Service (FOS) must also be provided. This transparency aims to ensure consumers are fully informed before committing to an agreement.
Perhaps one of the most significant benefits for consumers is the extension of Section 75 protection to eligible BNPL purchases ranging from £100 to £30,000. This brings BNPL in line with credit card purchases, meaning the BNPL provider can be held jointly liable with the retailer if issues arise with the purchased goods or services, such as non-delivery, faults, or retailer insolvency. The reforms are also designed to facilitate fairer and faster refunds, addressing past issues where some 'pay later' customers faced delays in receiving refunds or settling outstanding repayments after returning items.
Finally, if a consumer is dissatisfied with their BNPL provider, they now have a clear path to resolution. After complaining directly to the company, if the issue remains unresolved, consumers can escalate their case to the Financial Ombudsman Service. The FOS is a free, independent service capable of investigating complaints and ordering firms to rectify issues, including those related to affordability, understanding of the agreement, or account handling. The FOS anticipates receiving approximately 2,000 BNPL complaints in the current financial year, underscoring the expected impact of these new protections.