Huge buy now, pay later update for millions as major rule change to kick in – what it means for shoppers
The government has now legislated to bring these interest-free payment plans, officially termed "Deferred Payment Credit" (DPC), under the financial watchdog's rule.
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The shake-up, first revealed by The Sun in October 2024, will come into force on July 15, 2026 and will protect shoppers and enforce stricter rules.
Under new rules proposed by the Financial Conduct Authority (FCA) today, lenders will have to check if borrowers can afford repayments and help them out if they run into financial trouble.
Borrowers will also be able to file complaints with the Financial Ombudsman Service.
BNPL products are a way for people to spread the costs of purchases without paying interest.
But BNPL providers have operated largely outside strict financial rules, unlike traditional credit cards or loans.
Concerns have been raised that some people could end up taking out loans that they cannot afford to pay back on time, incurring charges.
According to the FCA's research, one in five UK adults – around 10.9million – had used BNPL at least once in the 12 months to May 2024, up from 17% in 2022.
In May 2024, 2% of UK adults (1.1million) had £500 or more outstanding unregulated BNPL debt, while 11% (5.3million) had £50 or more outstanding, the regulator found.
The FCA's consultation on BNPL rules, is now inviting feedback from lenders, consumer groups, and others until September 26, 2025.
The final rules will be decided next year.
Firms will have six months from the date the regime comes into force to apply for full authorisation.
Sarah Pritchard, deputy chief executive at the FCA, said: "We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected.
"Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions."
Debt charities and consumer rights groups have welcomed the news.
Vikki Brownridge, chief executive 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.
'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."
Vix Leyton, a consumer expert at app ThinkMoney, added: "Proper affordability checks, in line with other credit products, are vital to stop people unintentionally kicking the financial can down the road, as is making sure that those in financially vulnerable positions understand the consequences of missed payments."
Both Klarna and Clearpay support the measures.
What will the new rules mean for shoppers?
If a product or firm is regulated, it means that customers are covered by certain protections if they are treated unfairly or something goes wrong with their product or service.
Firms will have to carry out strict affordability checks
First and foremost, BNPL will be required to properly check if you can truly afford to repay a loan.
This means no more easy credit for those who might struggle.
The goal is to make sure BNPL lending is always affordable.
BNPL providers aren't currently required to carry out such stringent checks, although some firms, like Klarna, have introduced them voluntarily.
Customers will need to be properly informed
This means you'll get much clearer information before you hit checkout.
Before you commit to a BNPL agreement, companies will have to proactively give you essential details.
This includes the 0% interest rate, the exact credit amount, the number and frequency of payments, and the cost of each payment.
Crucially, they'll have to spell out the consequences of missed payments, including any charges and how it might impact your credit score.
This will ensure you make an informed decision.
If you hit a rough patch and miss a payment, the BNPL provider will also be required to act fast.
They'll have to notify you as soon as possible, clearly stating any unpaid sums, including late fees.
They also must provide information on how to avoid further problems and offer support.
Firms are expected to treat customers in financial difficulty with "forbearance and due consideration".
This includes guidance on managing your finances and access to free debt advice.
Shoppers will be able to complain to the Financial Ombudsman Service
Shoppers will soon be able to take complaints about BNPL firms to the Financial Ombudsman Service (FOS).
Currently, BNPL users can't escalate issues to the FOS, which helps resolve disputes between consumers and regulated financial firms.
Under the new rules, if you're unhappy with how a BNPL company handles your complaint, you'll be able to take it to the independent FOS for a fair and impartial resolution.
This gives shoppers a stronger way to settle disputes if things go wrong and fight for compensation if they've been wronged.
Shoppers will be able to return items for a full refund if they are faulty or were mis-sold
Proposed changes will also bring BNPL products under Section 75 of the Consumer Credit Act, giving shoppers crucial protections.
Currently, BNPL users may struggle to get refunds or replacements for faulty items, as these protections don't apply.
Under Section 75, if you buy something costing £100 to £30,000 using BNPL credit and the goods are faulty, not delivered, or the retailer goes bust, the BNPL lender is equally responsible.
This means shoppers can claim refunds, repairs, or compensation directly from the lender, even if the retailer is unavailable or out of business.
How to get free debt help
There are several groups which can help you with your problem debts for free.
Citizens Advice - 0800 144 8848 (England) / 0800 702 2020 (Wales)
StepChange - 0800138 1111
National Debtline - 0808 808 4000
Debt Advice Foundation - 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations - don't be tempted to use a claims management firm.
They say they can write off lots of your debt in return for a large upfront fee.
But there are other options where you don't need to pay.
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