The rule change means some shoppers will be refused this type of credit, preventing many from taking on too much debt and being caught out by fees for missed payments.
The affordability checks are one of the changes the Financial Conduct Authority (FCA) will bring in when the sector starts being regulated next summer. The regulator announced today (18 July) that BNPL will come under its regulatory regime by July 2026, bringing BNPL in line with the rest of the consumer credit sector.
BNPL offers shoppers interest-free credit, allowing them to buy something immediately, then repay in weekly or monthly instalments. Payments are normally taken automatically from the borrower’s bank account.
Thousands of retailers partner with BNPL operators such as Klarna and Clearpay, enabling shoppers to delay payment for anything from takeaways and clothes to holidays. But the sector is currently unregulated, which means that lenders don’t need FCA approval to operate.
The FCA has published proposals for BNPL regulation, including a requirement for lenders to check that people can afford to repay BNPL loans and to offer support if they get into financial difficulty.
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BNPL borrowers will also be able to complain to the Financial Ombudsman Service (FOS) if something goes wrong.
FCA’s research on unregulated BNPL found one in five UK adults (10.9 million) had used this type of credit at least once in the 12 months to May 2024, up from 17% (8.8 million) in 2022.
The FCA has long called for BNPL products to be brought into its remit, so people can benefit from BNPL while being protected. It said regulation “will help consumers navigate their financial lives”, with checks on whether they can afford to repay loans, support when things go wrong and access to the right information to make informed decisions.
The final rules are yet to be set in stone – the regulator is welcoming views from BNPL lenders, consumer groups, the wider industry and other interested parties until 26 September 2025.
‘A significant step forward’
Rocio Concha, Which?’s director of policy and advocacy, said: “Buy now, pay later can be a really convenient way to spread the cost of items, but because it is not yet regulated, it hasn’t come without risk to consumers.
“Regulation will mean that consumers will be subject to affordability checks to ensure responsible lending as well as making sure they are given sufficient information about the credit they are taking on and the risk of falling into debt.
“Which? has campaigned for years to ensure BNPL products are regulated, so it’s good to see the Government moving forward with plans to protect consumers who want to pay for products and services in this way. It is also encouraging that consumers will be able to access redress via the Financial Ombudsman Service should something go wrong with their purchase.”
Vikki Brownridge, CEO of StepChange Debt Charity, said: “It’s incredibly reassuring to see the FCA’s consultation on its proposed approach to regulating buy now, pay later. This marks a significant step forward in what has long been a key campaign for StepChange Debt Charity to support our clients from problem debt. Whilst BNPL can be a useful budgeting tool, it can deepen debt problems, and it is important struggling consumers are afforded the same level of protection as for other forms of credit.
“Bringing BNPL firms in line with the wider credit market, when regulation begins next year, will provide an added layer of protections for consumers, a much-needed change, as StepChange polling found that BNPL users are twice as likely as all credit users to borrow to cover essential bills, and our research also found that BNPL is now as common as using an overdraft amongst UK adults.”
