The UK Government has launched a consultation to introduce robust regulations for Buy-Now, Pay-Later (BNPL) products. These popular credit options, which allow shoppers to spread payments over time, are currently outside the scope of traditional consumer credit protections.
The proposed regulatory framework will bring BNPL firms under the direct supervision of the Financial Conduct Authority (FCA) and implement key provisions of the Consumer Credit Act to ensure transparency, responsible lending, and customer redress mechanisms.
Protecting Consumers from Unaffordable Debt
The new rules will compel BNPL providers to carry out affordability checks before offering credit. This aims to curb the rising trend of unmanageable debt, especially among younger consumers, who often use BNPL to finance online purchases without fully understanding the financial consequences.
The Government has also proposed simplifying the information consumers receive about BNPL agreements. While the Consumer Credit Act’s disclosure requirements will be disapplied, the FCA will design digital-first communication standards tailored to the online platforms where BNPL is most commonly used.
Key Consumer Protections to Be Enforced
Under the proposed legislation, BNPL customers will gain stronger rights if they face issues with purchases. This includes the application of Section 75 of the Consumer Credit Act—giving them the ability to claim refunds from lenders—and access to the Financial Ombudsman Service for dispute resolution.
Tulip Siddiq, Economic Secretary to the Treasury, stated:
“Millions of people rely on Buy-Now, Pay-Later to manage everyday expenses, but the last government failed to act, leaving them without essential protections. We’re changing that. These new measures will ensure shoppers get the same safeguards as with other credit products, while giving the industry the clarity it needs to innovate and grow.”
Widespread Support from Consumer Advocates and Industry Leaders
The announcement has drawn praise from consumer groups, fintech leaders, and financial regulators alike.
Rocio Concha, Director of Policy and Advocacy at Which?, said:
“Our research shows that many BNPL users don’t realise they’re taking on debt or what happens if they miss payments. These proposals are a win for consumers. The emphasis on affordability checks, clear information, and avenues for redress is much needed.”
Sebastian Siemiatkowski, CEO and Co-Founder of Klarna, also welcomed the government’s quick action:
“The government has worked closely with the industry and consumer groups. We look forward to contributing to the development of balanced regulations that protect users and support innovation.”
Michael Saadat, International Head of Public Policy at Clearpay, echoed the sentiment:
“It’s reassuring to see the Treasury adopt a proportionate and fit-for-purpose regulatory approach. We’ve long supported rules that prioritise customer protection while enabling the fintech sector to thrive.”
Chris Woolard, who led the 2021 Woolard Review into unsecured credit markets, called the development a “major step forward,” stating:
“Millions of people, especially the most vulnerable, will benefit from stronger protections. It also brings long-awaited certainty to the sector.”
Timeline and Legislative Process
The government aims to fast-track the consultation, which will remain open until 29 November 2025, reflecting the urgency to safeguard consumers. Final legislation is expected to be introduced in early 2025, with full FCA regulatory oversight and rules coming into effect in 2026.
This announcement aligns with Prime Ministerial commitments to remove outdated barriers to growth while ensuring consumers are not left at risk of financial hardship. As BNPL continues to gain traction across the UK, this regulation seeks to strike a balance between innovation and accountability.
Justin Basini, CEO of The ClearScore Group, summed it up:
“It’s a smart and necessary step. BNPL is here to stay, and aligning it with other mainstream credit products will give consumers both flexibility and protection.”
Read More: ‘Buy Now, Pay Later Culture’: How Westernised Thinking is Trapping Indian Youth?
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