Major rule change affecting all shoppers using buy now, pay later | Personal Finance | Finance

Shoppers using Buy Now, Pay Later (BNPL) services will soon face stricter affordability checks following a major rule change set to take effect next year. The new rules, brought in by the Financial Conduct Authority (FCA), will require BNPL providers to check whether people can realistically afford to repay their loans and offer support if they get into financial difficulty.

The change aims to reduce the risk of shoppers falling into unmanageable debt and is expected to prevent impulse spending on unaffordable purchases. Borrowers will also be able to complain to the Financial Ombudsman Service if something goes wrong. The rules will give consumers more transparency over what this type of borrowing involves and are set to take effect in July 2026 when BNPL comes under the FCA’s remit. 

BNPL products are a way for shoppers to spread the costs of purchases without paying interest if they repay it in time, typically over a period of up to 12 months, and it is a payment option that regularly pops up at online checkouts. Major players such as Klarna and Clearpay offer the service through many of the UK’s largest retailers.

But the service has sparked concerns that shoppers could end up taking out loans they can’t afford to pay back on time and incur charges. 

Under the proposed rule changes, the new oversight by the FCA would mean BNPL borrowers will have key protections that already exist for other types of lending.

Sarah Pritchard, deputy chief executive at the FCA, said: “We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected.

“Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions.

“We’re mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.”

According to the FCA, an estimated 11 million people used BNPL in the UK last year, with 30% of adults aged 25 to 34 using the service at least once in the 12 months to May 2024. The most common purchases included lifestyle and beauty products, as well as gifts and personal treats.

Currently, BNPL products operate outside of the FCA’s full regulatory framework, meaning providers haven’t been required to get approval or perform credit checks before offering these loans. 

Joe Smithies, spokesperson for UK-based debt management company PennyPlan, says the changes are “much-needed” as shoppers are increasingly borrowing to cover essential living costs, not just non-essential spending.

He said: “It’s incredibly easy to fall into a trap with Buy Now, Pay Later. Because it’s so convenient, people often underestimate how quickly the debt can pile up. Our research shows BNPL is now as common as overdrafts among UK adults. The fact that people are turning to these services to pay bills is a warning sign that regulation is overdue.”

With new legislation now in place, the FCA is preparing to consult on detailed rules which will include upfront affordability checks, faster refund processes, and clearer guidance on cancellation rights, charges, and credit rating impacts in the case of missed payments.

But the FCA says firms will be allowed some flexibility in how they conduct affordability assessments meaning different providers could use different approaches, although all must demonstrate that customers can realistically repay the borrowing.

Mr Smithies adds: “Credit isn’t suitable for everyone. Some consumers will no longer qualify, but they should be signposted to support-like debt advice-rather than left behind.”

Both Klarna and Clearpay have expressed support for the move, with a Klarna spokesperson calling the upcoming regulation a “major win for UK consumers,” while Clearpay said it would create “a more sustainable foundation for the future of BNPL.”

The FCA’s public consultation will run through late September 2025, followed by a temporary regulatory regime to bridge the gap until the full rules come into force in July 2026.