From 15 July, buy now, pay later (BNPL) providers will become subject to the FCA’s regulation.

The millions of Brits who use buy now, pay later (BNPL) services when shopping are set to gain stronger rights and clearer protections this summer under new regulation by the Financial Conduct Authority (FCA). The city watchdog confirmed that from 15 July, buy now, pay later (BNPL) providers will become subject to the FCA’s regulation, meaning they will need to abide by stricter rules when lending. Using a BNPL service can make sense for those who want to spread the cost of a large purchase into smaller, monthly instalments, but it has left some people borrowing more than they can afford. Under the new rules, BNPL lenders will be legally obliged to carry out affordability checks on borrower’s income and spending if they have a poor credit history before allowing them to take out a short-term BNPL loan. Consumers will also get clearer details about the nature of the credit agreement, including when payments will be due, the amounts they will owe, and what happens if they miss a payment. The new rules will also mean that consumers will be able to complain to the Financial Ombudsman Service if something goes wrong in the lending process. BNPL services are increasingly popular, especially for those who shop online, with the FCA estimating 11 million people in the UK use BNPL services. The largest providers in the UK include Klarna, Clearpay, PayPal’s pay later service, and Zilch. The FCA said the BNPL sector provides an important source of credit for many who want to access it, but found there are no protections in place for those who use it repeatedly or are unable to afford it. 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.” The new rules come after the government announced in 2025 that they wanted to end what they called the “wild west” of unregulated borrowing by bringing BNPL under the FCA’s purview. Do the new regulations go far enough? While many have welcomed the new regulations, saying they will help make BNPL lending fairer, some worry the new regulations do not go far enough. Greg Davies, from behavioural finance firm Oxford Risk, said while the new regulation is welcome, it fails to fully deal with other structural issues within the BNPL sector. He said: “Affordability checks based purely on patchy credit histories are necessary but reactive. Behavioural signals such as repeat usage, stacking across providers, or escalating short-term commitments can indicate vulnerability earlier than traditional credit data. “The right goal is proportionate protection: preserve flexibility for those using the product responsibly, while introducing clearer visibility and friction where patterns suggest mounting risk. That is how you protect consumers without killing innovation.” Meanwhile, Alastair Douglas, chief executive of fintech TotallyMoney, warned that when the new regulations come into force, some consumers may look for riskier credit elsewhere. He said: “Regulating Buy Now Pay Later is a positive step, but one which is long overdue. Analysts estimate that up to a third of current BNPL users could lose access once the new rules kick in – which tells you just how many people have already been borrowing without the proper safeguards. “The problem the government and regulator face next is what fills the BNPL gap once lending is tightened up. If people who’ve relied on it for so long suddenly find themselves locked out, they’ll start to look for credit elsewhere – which could push the vulnerable into the arms of unregulated and illegal lenders.”

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