Buy now pay later (BNPL) customers taking out deals will have a new safety net from July 15, as the sector comes under the supervision of the City regulator, the Financial Conduct Authority (FCA). This move aims to provide stronger protections for consumers and ensure responsible lending practices.
How Does BNPL Work?
BNPL options often appear at online checkouts, allowing shoppers to spread the cost of their purchase without paying interest. Instead of making a full payment upfront, customers can split the amount into smaller, interest-free instalments. This can help ease immediate cost pressures but also carries risks.
Why Has BNPL Been Controversial?
For many, using BNPL eases cost pressures by spreading payments into more manageable chunks. However, critics argue it may encourage overspending. Some users have found their budgets quickly consumed by multiple BNPL loans, leading them to turn to high-cost debt like overdrafts to cover repayments. According to charity StepChange, BNPL can make it more tempting to make purchases or spend more than initially budgeted for.
Key Changes from July 15
The sector will now be overseen by the FCA and subject to its regulation. This means firms must provide customers with clear, upfront details about their agreement, including payment due dates, amounts, and consequences of missed payments. Lenders must carry out proportionate affordability checks before offering BNPL. Additionally, BNPL usage may appear on credit reports, affecting future lending decisions positively or negatively depending on financial behaviour. Firms must also offer support to customers in financial difficulty and, where appropriate, direct them to free debt advice. Some BNPL providers have welcomed regulation as a way to level the playing field.
Complaints to the Financial Ombudsman Service
BNPL customers will have the option to complain to the Financial Ombudsman Service (FOS) if they are unhappy with their agreement, for example regarding affordability. The FOS settles disputes between consumers and regulated financial businesses and is free for consumers to use. Complaints can be taken to the ombudsman if they concern agreements taken out on or after July 15, 2026, and involve a regulated firm. Customers must first complain to their BNPL provider; if unsatisfied, they can submit a complaint to the FOS.
Help for Those Worried About Debt
StepChange suggests pausing to consider whether you would still buy items if they were not available on credit. The charity also recommends keeping a record of payments and loan terms to ensure they fit your budget and do not require cutting back on essentials. This is particularly helpful for those with multiple debts. People struggling with loans should contact their lender. Support is also available from organisations such as StepChange, Citizens Advice, Christians Against Poverty, and the National Debtline debt advice service run by the Money Advice Trust.
