Buy now, pay later (BNPL) shoppers will need to undergo stricter affordability checks, it has been revealed.
New rules coming into force next July will see some people refused BNPL credit services if they don’t meet the new criteria.
Industry regulators hope that the change will prevent people taking on unaffordable debt and being caught out by late payment fees.
What is buy now, pay later?
BNPL is an interest-free credit service. It allows shoppers to buy something immediately and replay in instalments within 12 months or less.
It’s currently unregulated, which means that lenders don’t need approval from the Financial Conduct Authority (FCA)
However, FCA figures show around 11 million people in the UK have used buy now, pay later services in the last year.
A survey by the finance watchdog found that 30% of adults aged between 25 and 34 had used it in the 12 months to May 2024.
The study also found services offered by companies like Klarna and Clearpay are commonly used for “lifestyle and beauty purchases” or “treating myself or other people”.
What is going to change?
While BNPL can offer a convenient way to spread payments for goods and services, there are also risks and potential for harm.
Services will fall under the FCA’s remit in 2026. Proposed changes include requiring lenders to check that people can afford to pay BNPL loans. Lenders will also be required to provide support to customers if they get into financial difficulty.
Meanwhile, borrowers will be able to complain to the Financial Ombudsman Service if goes wrong during their payment term or with the service provided.
Speaking of the protections, 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.”
What to do if you’re struggling with BNPL debt?
Although it might not seem like it when buying, it’s important to remember that BNPL is a form of credit.
Anyone who uses the serve will need to repay the full cost of whatever they buy as well as any charges or late or missed payments. Some BNPL companies also charge interest or service fees.
With that in mind, it’s always important to keep track of what you borrow, spend and owe when spreading the cost of any purchase.
If you find yourself struggling to manage a BNPL agreement, it’s important to reach out to the lender to discuss potential repayment options.
Alternatively, you could speak to a debt help company or charity for free advice on how to manage what you owe.
Talking of the service, UK Debt Expert’s Maxine McCreadie added: “Buy Now, Pay Later can be a useful way to manage your money, especially for larger purchases where you’ve planned and budgeted.
“But regularly using it to buy smaller, everyday items could lead to financial problems. It feels like it’s become too easy to delay payment without really thinking through the long-term consequences.
“One of the big issues is how BNPL is marketed. It’s often positioned as something separate from traditional credit, which can make it feel less serious – but the reality is, it’s still a form of debt. Miss a payment and you could find yourself facing late fees and doing damage to your credit score.”
She added: “New rules coming into force next July will mean that shoppers will have to pass stricter affordability checks before being approved for BNPL products. It brings BNPL more in line with other credit products, and should help people stop and think before clicking ‘pay later’ at checkout.
“Ultimately, it’s about reminding people that these services do have a financial impact and encouraging them to make informed, considered choices rather than falling into a cycle of spending that could be hard to break.”
