Major changes are coming for buy now, pay later (BNPL) services such as Klarna, Clearpay and PayPal, with new regulations taking effect from July 15, 2026. These changes will make it harder for some shoppers to complete purchases while providing stronger protections for consumers.
What Is Changing?
The Financial Conduct Authority (FCA) will officially regulate the BNPL sector from July 15, 2026. All lenders offering BNPL products must be authorised by the regulator. Key changes include:
- Mandatory affordability checks: Lenders must conduct proportionate credit and affordability checks for every purchase, not just when opening an account.
- Section 75 protection: For BNPL agreements on items costing between £100 and £30,000, the finance provider will be jointly liable with the retailer if a product is faulty or never arrives.
- Financial distress support: Providers must offer clear pathways to free debt advice and cannot aggressively stack late fees on struggling customers.
Why Is This Happening?
BNPL options allow shoppers to spread the cost of purchases, which can help manage payments. However, concerns have grown that some people overstretch themselves financially, worsening debt problems. The FCA says regulation will ensure consumers receive clear upfront details about agreements, including payment due dates, amounts and consequences of missed payments.
Sarah Pritchard, deputy chief executive at the FCA, said: "We want the buy now, pay later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products. But crucially, no-one should be lent to if they’re unable to repay because that could worsen their financial situation."
Market Impact
The BNPL market reached over £13 billion in 2024, according to the FCA. Its 2024 Financial Lives Survey found that 20% of UK consumers (10.9 million adults) used BNPL in the 12 months to May 2024. Consumer groups have long campaigned for regulation.
Peter Tutton, director of policy, research and public affairs at StepChange Debt Charity, said: "Buy now, pay later can be a helpful way for people to spread costs. But like any form of credit, it carries risks when repayments become difficult. The absence of FCA regulation until now has only heightened the risk of financial harm."
Rocio Concha, Which? director of policy and advocacy, added: "Which? has campaigned for years for BNPL to be regulated and clearer information, proper affordability checks and access to redress when things go wrong should give shoppers proper protections."
Industry Reaction
A spokesperson for Clearpay said: "We welcome regulation, which will establish a consistent operating environment and clear compliance standards for all providers." A Klarna spokesperson said: "These new rules will raise standards across the market." UK Finance also supported the move, stating: "It’s right that the product is regulated."
Key Dates
The major changes take effect on July 15, 2026. From this date, consumers will also be able to complain to the Financial Ombudsman Service if something goes wrong with their BNPL agreement.
