The FCA has launched a new buy now, pay later consultation into how it can protect customers from taking on debt that they cannot afford
Some shoppers will be stopped from using buy now, pay later (BNPL) under stricter affordability checks which are due to come into force next year.
The Financial Conduct Authority (FCA) has launched a new consultation into how it can protect customers from taking on debt that they cannot afford.
BNPL lets shoppers buy items on credit and pay for it later, usually spread out over several months, interest-free – but debt charities have raised concerns that some people end up taking out loans that they cannot afford.
You can get charged late fees if you miss a BNPL payment and some firms also report missed payments to credit referencing agencies.
Under new proposals, BNPL providers will have to check that people can afford to repay their loans and offer support if they get into financial difficulty. Borrowers will also be able to complain to the Financial Ombudsman Service if something goes wrong.
The rules would come into effect when BNPL comes under FCA remit next year. According to FCA research, one in five (20%) UK adults – roughly 10.9 million people – used BNPL at least once in the 12 months to May 2024. This is up from 17% in 2022.
In May 2024, 2% of UK adults (1.1 million people) had £500 or more outstanding unregulated BNPL debt, and 11% of UK adults (5.3 million people) had £50 or more outstanding.
The FCA consultation is open for feedback until September 26, 2025, and the rules would come into force from July 15, 2026. 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.
“We’re mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.”
A Klarna spokesperson said: “After five years of constructive work with HMT (HM Treasury), we’re entering the home straight to make BNPL regulation a reality – a major win for UK consumers.
“We’re looking forward to working with the FCA on rules that protect consumers while keeping choice and innovation at the heart of the UK credit market.”
A Clearpay spokesperson said: “We will support the FCA as it consults on and finalises its specific rules for the sector.” The spokesperson said regulation “will establish a consistent operating environment and clear compliance standards for all providers”.
They added: “Clearpay research highlighted that nearly half of UK adults (48%) are more likely to use BNPL once regulation is passed, and with 71% believing that it is important for BNPL to be subject to UK financial legislation, today’s announcement will help foster trust among consumers.
“It will also create a more sustainable foundation for the future of BNPL as it continues to grow as an everyday payment option for consumers.”