Buy now, pay later allows people to spread the cost of purchases, but the sector has come under criticism in the past
Buy now, pay later customers will undergo affordability checks and will have access to support if things go wrong under stronger protections coming into force from July.
The sector will come under Financial Conduct Authority (FCA) regulation from July 15, 2026. From this date, anyone using buy now, pay later must receive clear, upfront details about their agreement.
This should include when payments will be due, how much will be due, and what happens if they miss a payment.
Buy now, pay later lenders must also carry out checks to make sure customers can afford to repay what they borrow.
There must also be support offered if customers find themselves in financial difficulty, including signposting them to free debt advice.
Buy now, pay later users will also be able to complain to the Financial Ombudsman Service (FOS) if they feel they have not been treated fairly.
Lenders will need to be authorised by the regulator and will also be subject to Consumer Duty rules, which set higher standards of consumer protection across UK financial services.
Firms will have six months from the date the regime comes into force to apply for full authorisation.
Buy now, pay later allows people to spread the cost of purchases, but the sector has come under criticism in the past over concerns it could see people taking on debt that they can’t afford to pay back.
The buy now, pay later market grew to £13billion in 2024, the FCA said, and 10.9 million adults used a buy now, pay later service in the 12 months to May 2024.
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.”
Peter Tutton, director of policy, research and public affairs at StepChange Debt Charity, said: “Buy now, pay later can be a helpful way for people to spread costs.
“But like any form of credit, it carries risks when repayments become difficult. The absence of FCA regulation until now has only heightened the risk of financial harm for those relying on BNPL.
“Going forward, people using BNPL products will be protected by affordability checks, consistent support from lenders and access to the Financial Ombudsman if things go wrong – these are all essential safeguards for borrowers using any type of credit.
“We would urge anyone using BNPL to always double check that the repayments will be affordable, and if you are struggling to repay, free and impartial debt advice is available from charities like StepChange.”
