Some consumers may face restrictions on using buy now, pay later (BNPL) services as stricter affordability assessments are set to be implemented next year. The Financial Conduct Authority (FCA) has initiated a consultation to safeguard customers from falling into unmanageable debt.
BNPL allows individuals to purchase goods on credit with the option to make payments later, typically interest-free over several months. However, concerns raised by debt charities indicate that some individuals may unknowingly take on loans beyond their financial capacity.
Late fees may be imposed for missed BNPL payments, and certain companies may report these delinquencies to credit agencies. Under new regulations, BNPL providers will be required to verify borrowers’ repayment capabilities and offer assistance in case of financial distress. Borrowers will also have the right to escalate complaints to the Financial Ombudsman Service.
According to FCA data, approximately one in five UK adults (equivalent to around 10.9 million people) utilized BNPL at least once in the 12 months leading up to May 2024, marking an increase from the previous year. A small percentage of UK adults had significant outstanding unregulated BNPL debts, emphasizing the importance of enhanced oversight in this sector.
The FCA consultation period will remain open for feedback until September 26, 2025, with the new rules expected to be enforced starting July 15, 2026. Providers will have a six-month window from the enforcement date to apply for full authorization.
Sarah Pritchard, FCA’s deputy chief executive, emphasized the necessity of regulating BNPL products to offer consumer protection while promoting financial literacy and informed decision-making. The impending rules aim to align with existing requirements, including the Consumer Duty, to support industry growth and innovation.
Representatives from major BNPL firms, such as Klarna and Clearpay, have expressed support for the impending regulations, highlighting the importance of consumer protection, compliance standards, and the establishment of a sustainable framework for the future of BNPL services.