Buy Now Pay Later borrowers to get stronger protections from July

New FCA rules will require lenders to carry out affordability checks and offer support to customers in financial difficulty

Over 11 million people who use Buy Now Pay Later (BNPL) will benefit from stronger protections from 15 July 2026, after the Government confirmed the unregulated sector will be brought under Financial Conduct Authority regulation for the first time.

Until now, the absence of regulation has left consumers at greater risk of financial harm, particularly those already struggling with their finances. The new rules mean BNPL lenders must carry out affordability checks before offering credit, provide clear information about repayment terms and offer support to customers struggling with payments.

Anne Pardoe, head of policy at Citizens Advice, said: 

“These protections couldn’t come soon enough. The growing BNPL market is driving more people to our services each year, with many struggling to repay credit they can’t afford or falling behind on essential bills.”

The FCA’s 2024 Financial Lives Survey found that 20% of UK consumers – around 10.9 million adults – used BNPL in the 12 months to May 2024. The market has grown significantly in recent years, from £0.06 billion in 2017 to over £13 billion in 2024.

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What the new protections mean for BNPL borrowers

BNPL options often appear at online checkouts and enable people to spread the cost of purchases, which for some could make their payments easier to manage. However, the products have been controversial, with concerns that some people could be overstretching themselves financially and making debt problems worse.

Until now, there have been no protections in place for those who use BNPL repeatedly and may not be able to afford it. From 15 July 2026, BNPL will be subject to the Consumer Duty and consumers should benefit from:

• Clear information: You will get clear, upfront details about your agreement, including when payments will be due, how much you’ll need to pay and what happens if you miss a payment. This addresses concerns that consumers haven’t been made sufficiently aware of the risks attached with this form of credit, such as late fees and the potential of getting into debt.
• Affordability checks: Lenders must carry out proportionate checks to make sure you can afford to repay what you borrow before offering BNPL. This is designed to prevent people being lent to when they cannot afford the repayments, which could worsen their financial situation.
• Support when needed: Lenders will need to offer support to customers in financial difficulty and, where appropriate, direct them to free debt advice services.
• Complaints and compensation: If something goes wrong, you will be able to complain to the Financial Ombudsman Service, which can order firms to pay compensation or put things right.

The aim of the new regulation is to help consumers navigate their financial lives with appropriate support, while still allowing the sector to grow and develop innovative products.

FCA aims to balance innovation with consumer protection

The FCA said its “proportionate” approach will make sure BNPL can be accessed by people if lending is affordable, and will also encourage firms to innovate and compete effectively in consumers’ interests.

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 regulator said the aim of the new regulation is to help consumers navigate their finances with appropriate support, while still allowing the sector to thrive and develop innovative products. BNPL providers have welcomed the move, with both Clearpay and Klarna saying the new rules will raise standards and establish clear compliance standards across the market.

What lenders need to do

BNPL lenders will need to be authorised by the FCA to continue providing their services. Firms will be able to register for a temporary permissions regime between 15 May 2026 and 1 July 2026, giving them six months from when the regime comes into force to apply for full authorisation.

The FCA will provide pre-application support to firms to help them get ready for regulation. This is designed to ensure lenders can continue operating while meeting the new standards required to protect consumers.

Suppliers that provide their own credit, known as “merchant own credit” or, more commonly called store credit, will remain exempt from regulation. This exemption was a decision the Government made in 2024.

What borrowers should know about using BNPL

While the new rules will provide important protections, consumers should remember that BNPL is borrowing and they need to make sure they can afford the repayments before taking it out.

Where consumers can afford to use BNPL, it can work well for managing cash flow and spreading the cost of purchases. However, firms now have a responsibility to check that you can afford to repay before offering BNPL, which may mean some people are declined if lenders determine they cannot afford the credit.

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.”

The FCA’s decision to regulate BNPL follows growing concerns about consumers using the product repeatedly without adequate checks on whether they can afford to repay. The new protections aim to strike a balance between allowing access to credit for those who can afford it and preventing harm to vulnerable consumers.

If you’re struggling with money, debt charity StepChange provides free advice and tailored support to help you deal with your debt. “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,” added Tutton.

You can also get guidance on dealing with debt from MoneyHelper. You can also use the Debt Advice Locator tool to find free services in your area. 

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