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Customers using ‘Buy Now Pay Later’ loans will benefit from greater protections now that these schemes are regulated by the Financial Conduct Authority (FCA).
The new protections, which came into effect on July 15, 2026, are designed to raise consumer awareness around these loans and prevent irresponsible lending practices.
So-called ‘BNPL’ schemes have become increasingly popular in recent years, as they allow customers to spread out a payment if they can’t afford it upfront. Last year 45% of Brits used BNPL services, according to Finder.com, with one in six (17%) using BNPL for the first time. This type of scheme now accounts for 8% of all physical and online payments in the UK, and this is forecast to grow to 9% by 2030.
However, these products up until now have been unregulated, leaving borrowers without the kinds of protections that they usually would benefit from when taking out a loan.
How do ‘Buy Now Pay Later’ schemes work?
BNPL schemes allow customers to buy a given product and defer paying for it, either repaying the outstanding amount in instalments or all at once at a later date.
These types of loans are interest-free, which makes them particularly tempting, as you only pay the cost of the item itself, and nothing on top. However, missing a repayment usually results in late payment charges and damages your credit score, making it hard to apply for a mortgage or other forms of borrowing.
It is also argued that BNPL schemes tempt customers into buying items they can’t afford, spending money that they wouldn’t otherwise and landing them in financial trouble. This is why the model has become so popular among retailers in recent months, who offer the schemes to customers via lenders like Klarna and ClearPay.
Potential BNPL customers will also now be to credit checks, which are normally a standard procedure when you apply for a loan or credit card. This means that customers with histories of missed repayments and debt problems, who previously might have borrowed this way, should no longer be able to use these schemes.
Vikki Brownridge, CEO at StepChange Debt Charity, said: “There’s no doubt that BNPL can be a useful form of credit – especially as it’s usually short-term and interest-free – to spread the cost of a bulky expense. However, as with any form of credit, regulation is vital to protect customers if something goes wrong, and ensure people aren’t being offered credit where it’s not affordable – something which will trigger debt problems, as we see all too often.
“Consumers can go on using BNPL in the same way as before, but it’s important to be aware of the new protections. If you are finding yourself struggling to keep up with payments, rather than taking on more credit or BNPL agreements, we would always advise seeking free and impartial debt advice to help get back on track.”
Read more about these products in our article How do ‘Buy Now Pay Later’ schemes work?
What changes are being made?
The changes bring the rules for Buy Now Pay Later products in line with other kinds of loans and increase consumer protections.
With effect from 15 July 2026, lenders will need approval from the Financial Conduct Authority (FCA) in order to offer Buy Now Pay Later loans in the first place. They will also need to perform affordability checks on potential customers to make sure that they will actually be able to pay off the loan and not spiral into debt.
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.”
Customers can now take complaints to the Financial Ombudsman if they feel they have been treated unfairly. The Ombudsman is an official body that can investigate financial issues for you and seek to resolve them with the company in question.
Lenders will also have to make sure that their advertising is “fair, clear and not misleading”, so that customers will have enough knowledge to make an informed choice.
Importantly, anyone using BNPL from 15 July onwards benefits from valuable Section 75 Consumer Credit protection. Section 75 essentially means that if something goes wrong with something you’ve purchased using a BNPL arrangement, such as the item not arriving or being faulty, then the retailer and your BNPL company have the same responsibility towards you. So if the retailer won’t give you your money back, the BNPL company might, basically giving you an extra layer of protection. Credit cards already provide this protection. You can find out more about how it works in our guide Section 75 protections explained.
If you’re struggling with debt
If you’re in debt and aren’t able to pay back what you owe, it’s vital that you seek help as soon as possible. Contact your lenders and let them know you’re struggling to make your repayments – they might be able to arrange a more affordable repayment plan with you.
For more information you can read our guides on tried and tested ways to cut costs or ideas to help with budgeting if you’ve suffered a fall in income.
If you need further help, get in touch with one of the charities specialising in free debt advice. These include StepChange, National Debtline and the Debt Advice Foundation. You can find out more about your options if you’re in serious debt here.
The most important thing is that you seek help as soon as you can, to avoid problems building up and to enable you to take back control.
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