Britain brings new Buy Now, Pay Later rules to protect shoppers

By Gloria Methri

The UK government has unveiled plans to regulate the rapidly growing Buy Now, Pay Later (BNPL) sector, aiming to protect consumers and bring more transparency to this popular payment option. The new rules, set to take effect next year, seek to end what officials have described as the “wild west” of unregulated borrowing.

Stricter Rules to Prevent Consumer Debt

Under the proposed legislation, BNPL providers will be required to carry out affordability checks before offering credit. This means companies must ensure shoppers can afford their repayments, helping prevent individuals from accumulating debt beyond their means. The regulations will also speed up refund processes, giving consumers faster access to their money when issues arise.

BNPL has become a convenient financial tool for many, with an estimated 11 million UK consumers using these services in the past year. However, concerns have grown about some users overspending or not fully understanding the risks involved.

Consistent Standards for Safer Shopping

The government says the new regulations will require BNPL firms to follow consistent standards, so consumers clearly understand the terms of their agreements. This includes knowing how much they are borrowing, assessing whether they can repay it, and having access to support if problems occur.

Key consumer protections will also be introduced, such as the right to escalate complaints to the Financial Ombudsman Service, aligning BNPL with traditional credit products. This will give shoppers more confidence and a more straightforward route to resolve disputes.

What the New BNPL Regulations Include

Affordability Checks: BNPL providers must verify upfront that customers can reasonably repay their credit, preventing unmanageable debt.

FCA Regulation: The Financial Conduct Authority (FCA) will oversee BNPL companies and ensure transparent and responsible lending practices across the sector.

Enhanced Consumer Rights: Users will gain protections under the Consumer Credit Act, including Section 75, which covers claims for faulty or undelivered goods.

Greater Transparency: Providers must clearly disclose fees, terms, and potential impacts on credit scores, helping consumers make informed decisions.

Emma Reynolds, Economic Secretary to the Treasury, said, “Buy Now, Pay Later has transformed shopping for millions, but for too long, it has operated like the Wild West—leaving consumers exposed. These new rules will protect shoppers from debt traps while giving the industry the clarity it needs to grow and create jobs.”

This initiative is part of broader reforms to the Consumer Credit Act, replacing a framework that has been in place for over 50 years. The updated laws aim to reflect modern borrowing habits, encourage innovation, and support economic growth — all while putting consumer protection at the forefront.

With BNPL use continuing to rise, these regulations mark an essential step in balancing financial innovation with safeguarding the interests of shoppers across the UK.