Stricter affordability checks are set to prevent certain shoppers from utilizing buy now, pay later (BNPL) services starting next year. The Financial Conduct Authority (FCA) has initiated a consultation to safeguard customers from acquiring unmanageable debt.
BNPL allows consumers to make purchases on credit and settle the payment later, typically over several interest-free months. However, concerns raised by debt charities indicate that individuals may end up taking out loans beyond their financial capacity.
Missing a BNPL payment can result in late fees, and some companies may report these delinquencies to credit agencies. Under new regulations, BNPL providers will be required to assess borrowers’ repayment abilities and offer assistance if financial challenges arise. Borrowers will also have recourse to the Financial Ombudsman Service for grievance resolution.
According to FCA data, 20% of UK adults, approximately 10.9 million individuals, availed BNPL services at least once in the 12 months leading up to May 2024, up from 17% in 2022. In May 2024, 2% of UK adults had over £500 in unregulated BNPL debt, while 11% had balances exceeding £50.
The FCA consultation is open for feedback until September 26, 2025, with the rules slated to take effect from July 15, 2026. Firms will have a six-month window post-implementation to seek full authorization under the new regime.
Sarah Pritchard, FCA’s deputy chief executive, emphasized the importance of regulating BNPL products to provide consumer protection and financial guidance. The aim is to ensure affordability checks, support during financial distress, and access to relevant information for informed decision-making.
Industry responses have been positive, with Klarna and Clearpay expressing willingness to collaborate on implementing regulations that prioritize consumer protection while fostering innovation and choice in the UK credit market.