New buy now, pay later (BNPL) rules come into force today (July 15), requiring firms to conduct affordability checks and provide greater protections for the 11 million UK adults who use the service, according to the Financial Conduct Authority (FCA).
What is changing?
BNPL is now under FCA regulation. Firms must be authorised by the regulator to offer BNPL agreements, with six months from today to apply for full authorisation. Companies like Klarna and Clearpay must now conduct proportionate credit and affordability checks for every purchase, meaning some shoppers could be refused credit if concerns arise about their ability to repay.
Users will receive clear upfront details about their agreement, including payment due dates, amounts, and consequences of missed payments. While most BNPL lenders do not charge interest, late fees may apply, and missed payments can be reported to credit reference agencies, negatively impacting credit scores.
Support and redress
Firms must now provide greater support for customers in financial difficulty, including signposting to free debt advice. Customers who are treated unfairly can raise complaints to the Financial Ombudsman Service (FOS) for agreements made from today. Shoppers also gain Section 75 protection, making BNPL lenders jointly liable with retailers for faulty or undelivered items on purchases between £100 and £30,000.
Industry response
Klarna and Clearpay have welcomed the stricter rules. A Klarna spokesperson said: 'The FCA's rules largely formalise what we already do — we run affordability checks, show costs up front and report to credit reference agencies — while our 12 million customers in the UK gain new protections like Section 75 cover and Ombudsman access.'
Clearpay research highlights that 77% of UK adults support the new framework, and 61% believe it will provide better protection. A Clearpay spokesperson said: 'Clearpay welcomes Buy Now, Pay Later (BNPL) regulation that comes into effect today, which will help establish a consistent operating environment and clear standards for all providers.'
FCA statement
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. Now Parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.'
