New buy now, pay later rules - what do they mean for you?

Buy now, pay later customers have been given a range of new protections under reforms that have now come into force.

From Wednesday, the sector has come under the regulation of the Financial Conduct Authority (FCA), and lenders will need to be authorised by the regulator to provide Buy now, pay later (BNPL) products.

BNPL firms will also be subject to the Consumer Duty, which requires financial firms to put customers at the heart of what they do and which is overseen by the FCA.

A spokesperson for the FCA said: “Buy now pay later can be a form of credit, but people deserve to be protected when using it.

The industry is now regulated by the Financial Conduct Authority. / Credit: PA

“Lenders should check their customers can afford to pay it back.”

Here is how the changes could affect you.

How does BNPL work?

BNPL options, like Klarna and Clearpay, often appear at online checkouts, allowing shoppers to spread the cost of their purchase without paying interest, rather than making a payment all in one go.

Why has BNPL been controversial?

For many people, using BNPL will ease cost pressures by spreading payments into more palatable chunks.

Responsible spenders can use BNPL effectively, but some have been tempted to stretch their finances too far.

This could also mean some people turning to debt, which incurs charges, such as overdrafts, to cover the cost of their BNPL debt.

Businesses and banks that offer loans have, in the past, been under FCA regulation to ensure that the people they lend to can pay back what they borrow.

But the relatively new BNPL, despite effectively offering a loan, has not been under similar regulation until now.

What are the key changes?

The sector will be overseen by the FCA and subject to its regulation.

This means firms will be required to give customers clear, upfront details about their agreement, including when payments are due, amounts, and what happens if they miss a payment.

Lenders must carry out proportionate checks to ensure customers can afford to repay what they borrow before offering BNPL.

People may find that their BNPL use is taken into account by lenders using credit reports to make future lending decisions – which may have a positive or negative impact depending on the borrower’s financial behaviour.

Firms will need to offer support to customers in financial difficulty and, where appropriate, direct them to free debt advice.

Some BNPL providers have said they already offer strong protections for consumers and have welcomed regulation as a way of levelling the playing field.

What if I want to complain?

BNPL customers will now have the option to complain to the Financial Ombudsman Service (FOS) if they wish to, for example, if they are unhappy with the affordability of the agreement.

The ombudsman service settles disputes between consumers and regulated financial businesses and is free for consumers to use themselves directly.

Consumers will be able to take a complaint to the ombudsman as long as the complaint is about agreements taken out on or after July 15 2026, and the complaint is about a regulated firm.

Customers will need to complain to their BNPL provider first, and if they are unhappy with the response, they can submit a complaint to the FOS.

What if I am worried about debts?

Buy now, pay later may make it more tempting to make more purchases or spend more than initially budgeted for, but charity StepChange suggests pausing to consider whether you would still be buying the items in the first place if they were not available on credit.

The charity also suggests keeping a note of payments and the terms of each loan agreement to make sure this fits with your budget and that you will not have to cut back on essentials.

This could be particularly helpful for people with multiple debts.

People who are struggling with loans should contact their lender, and support is also available from various organisations, such as StepChange, Citizens Advice, Christians Against Poverty and the National Debtline debt advice service run by the Money Advice Trust.