From July 15, new Financial Conduct Authority (FCA) rules bring major changes for approximately 10.9 million UK adults who use buy now pay later (BNPL) services such as Klarna and Clearpay. The regulations require lenders to conduct affordability checks, provide clearer information about agreements, and offer better support to customers in financial difficulty. Users also gain the right to take complaints to the Financial Ombudsman Service if disputes with providers cannot be resolved.
Affordability Checks and Clearer Information
BNPL providers must now carry out proportionate checks to ensure customers can afford repayments before approving an agreement. Customers must receive upfront details explaining when payments are due, how much they will pay, and the consequences of missed repayments. The changes apply to agreements taken out from July 15 with FCA-regulated firms.
New Complaint Rights and Support
People unhappy with their BNPL provider can now take eligible complaints to the Financial Ombudsman Service after completing the firm's internal complaints process. Firms are expected to support customers experiencing financial problems and, where appropriate, direct them to free debt advice services.
Impact on Credit Records
BNPL borrowing may now be reported to credit reference agencies, meaning lenders could consider it when someone applies for a mortgage, loan, or credit card. Paying on time could demonstrate responsible borrowing, while missed repayments could negatively affect credit assessments.
Industry and Consumer Reactions
An FCA spokesperson said: "Buy now pay later can be a form of credit, but people deserve to be protected when using it. Lenders should check their customers can afford to pay it back." Sarah Coles, head of personal finance at AJ Bell, welcomed the tougher affordability rules, noting that many BNPL purchases are small and people often do not view them as borrowing. "It means a real risk of stacking these debts until they're unwieldy," she said. Consumer group Which? also welcomed the changes. Rocio Concha, director of policy and advocacy at Which?, urged shoppers to ensure they can comfortably afford repayments and understand the consequences of missing them.
Advice for Struggling Borrowers
Anyone finding it difficult to keep up with BNPL repayments should contact their lender as soon as possible rather than taking on more borrowing. Free debt advice is available from StepChange, Citizens Advice, Christians Against Poverty, and National Debtline. StepChange noted that BNPL can be useful short-term, interest-free credit, but regulation is essential to prevent unaffordable borrowing.
