Millions of buy now pay later (BNPL) customers will now face mandatory affordability checks and receive clearer information under new regulations enforced by the Financial Conduct Authority (FCA). The changes, effective from July 15, 2026, require all BNPL lenders to be authorised by the FCA and comply with the Consumer Duty, which mandates that financial firms prioritise customer interests.
New Protections for BNPL Users
The FCA has taken over regulation of the BNPL sector, which had grown to over £13 billion in 2024. According to the FCA’s 2024 Financial Lives Survey, 20% of UK consumers—approximately 10.9 million adults—used BNPL in the 12 months to May 2024. A spokesperson for the FCA stated: “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.” The spokesperson added that millions of customers will now receive clearer information before signing up and better support if issues arise.
Affordability Checks and Credit Reporting
Under the new rules, lenders must assess consumers’ creditworthiness, including affordability, and provide clear upfront information about payment due dates, amounts, and consequences of missed payments. BNPL agreements may also be reported to credit reference agencies, potentially affecting future lending decisions. Dimitar Lazarov, head of Credit Karma UK, warned that while timely payments could benefit credit scores, those falling behind should be aware that “it could have an impact on their ability to apply for other products.” John Webb, head of consumer affairs at Experian UK and Ireland, noted that new BNPL accounts might be considered by lenders when evaluating applications for loans, credit cards, or mortgages.
Industry and Consumer Responses
Sarah Coles, head of personal finance at AJ Bell, called the stricter affordability checks “highly sensible.” She explained that the Woolard Review, conducted by the FCA in 2021, found that many people did not view BNPL as borrowing, leading to a risk of accumulating unmanageable debt. “The added friction in the process should help people stop and think about whether they really need the item,” she said. Rocio Concha, director of policy and advocacy at Which?, noted that regulation “means users of these services will benefit from stronger safeguards.” She advised shoppers to consider whether they can afford repayments and understand the consequences of missing them.
Complaints and Ombudsman Access
Consumers can now take BNPL complaints to the Financial Ombudsman Service (FOS) for agreements taken out on or after July 15 with regulated firms. James Dipple-Johnstone, interim chief ombudsman for FOS, said: “This is an important step for consumers who use buy now pay later. If something goes wrong and they cannot resolve the issue with their provider, they now have access to our free and impartial service.” The FOS anticipates around 2,000 BNPL-related complaints in the current financial year.
Lender Reactions
BNPL providers have largely welcomed the regulation. A spokesperson for Clearpay said it “will help establish a consistent operating environment and clear standards for all providers,” adding that they will continue existing safeguards such as pausing accounts for missed payments and capped late fees. A Klarna spokesperson noted: “Klarna’s called for regulation since 2020, so we welcome this moment. The FCA’s rules largely formalise what we already do – we run affordability checks, show costs up front and report to credit reference agencies.”
Debt Advice and Consumer Guidance
Vikki Brownridge, chief executive at StepChange Debt Charity, emphasised that while BNPL can be useful for spreading costs, regulation is vital to protect customers. She advised: “If you are finding yourself struggling to keep up with payments, rather than taking on more credit or BNPL agreements, we would always advise seeking free and impartial debt advice to help get back on track.”
