From July 15, millions of UK shoppers using Buy Now Pay Later (BNPL) services will benefit from new regulations that bring lenders like Klarna and Clearpay under the oversight of the Financial Conduct Authority (FCA) for the first time. The reforms aim to provide greater protection against debt by introducing affordability assessments, mandatory support for customers in financial hardship, and access to the Financial Ombudsman Service for complaints.
Key Changes for Consumers
Jonathan Chesterman, debt advice policy manager at StepChange, explained: "If something goes wrong, shoppers have the right to complain to the BNPL provider. If shoppers don't receive a satisfactory response, they can then approach the Financial Ombudsman Service, which is free and objective." Previously, unresolved complaints could only be pursued through court under contract law.
Additionally, shoppers will receive clearer information about their commitments and what happens if they miss payments. The new rules require lenders to provide transparent details at checkout, potentially including a calculator to show repayment amounts before purchase.
Affordability Checks and Their Impact
While the exact form of affordability checks is not yet specified, Chesterman noted that "there should be warnings" or a calculator at checkout. He added: "The key thing is lenders will have to do something, whether that's asking the customer or a more detailed assessment of income and outgoings." These checks address two major issues: no current credit checks, allowing people in difficulty to accumulate more debt, and cases where StepChange has seen clients with over 30 BNPL agreements. "Affordability checks should mean lenders can no longer passively let that happen," Chesterman said.
What About Existing BNPL Agreements?
Any BNPL arrangements entered into before July 15 will not be covered by the new rules. Shoppers with multiple agreements are advised to review their debts and payment schedules. Those struggling with debt should seek free advice from Citizens Advice, which helps with unexpected costs, late fees, and debt collectors.
