Buy now, pay later options like Klarna and PayPal are extremely popular in the UK, allowing customers to buy products in instalments without any interest, provided payment deadlines are met. However, as a form of credit, new regulations are being imposed to bring buy now, pay later solutions in line with traditional borrowing. These changes will be implemented on 15th July 2026.
The Financial Conduct Authority (FCA) are imposing a formal regulation to address the rise in unpaid debt and to reduce risk to consumers. The changes will ensure stricter affordability checks, provide more transparent terms, and give better access to the Financial Ombudsman Service.
In this guide, we’ll outline what this means for consumers, take a more in-depth look at why the changes are being made, and compare the benefits of buy now, pay later compared to using a credit card.
Key Takeaways:
The new BNPL rules are designed to protect consumers, not stop them borrowing.
Expect stronger checks, clearer information and better rights if problems arise.
Some people may have lower spending limits or be declined.
Always borrow within your means and make repayments on time.
What is Buy Now, Pay Later?
Buy now, pay later schemes allow customers to buy products without paying for them up front, spreading the cost of a purchase over 30 days to three months in most cases. This is an ideal option for anyone who wants to delay paying for purchases in one go right away, instead paying in instalments to provide more financial freedom.
Additionally, buy now, pay later also makes it possible to try before you buy, particularly when it comes to clothes, as you can buy multiple versions of the same outfit in different sizes and colours, then return any unwanted items without having to pay for them.
Popular options include Klarna, ClearPay, PayPal Pay in 3, and Zilch.
Why Were the Rules Changed?
Around a third of British adults have used BNPL, prompting the FCA to introduce stronger consumer protections on the 15th July 2026. BNPL platforms have historically operated outside standard consumer credit laws, but the changes aim to make these solutions safer and more transparent for consumers.
The new regulations will:
Impose affordability checks to ensure customers can manage the repayments before any transactions are approved.
Provide more transparency about how payment plans work and the consequences of missing a payment.
Offer more support to customers who are struggling to make payments.
Make it easier to dispute changes to BNPL agreements and make complaints to the Financial Ombudsman Service.
What Changes on 15 July 2026?
Before | After |
|---|---|
Many BNPL products were unregulated | FCA regulation |
Limited consumer protections | Ombudsman access |
Basic checks | Stronger affordability assessments |
Limited complaint options | Formal complaints process |
Less consistent information | Clear borrowing information |
Buy Now, Pay Later – Biggest Changes Explained
The changes to buy now, pay later are significant for the industry, helping protect customers and ensuring they can afford repayments and don’t end up in financial trouble. Below is a more detailed breakdown of what is changing and the potential impact.
FCA Authorisation
From 15th July 2026, buy now, pay later providers must be authorised by the Financial Conduct Authority (FCA) or operate under temporary permissions while the authorisation process completes. This means they must meet FCA standards for treating customers fairly, reducing potential risk to customers, and offering only suitable products.
If providers fail to meet their obligations to the FCA, they will be investigated, and action will be taken to enforce improvements.
Stronger Affordability Checks
When applying for BNPL, providers must carry out higher-level checks that are in line with other credit to ensure customers can comfortably afford any repayments, rather than using a limited amount of information to approve applications. According to regulations, these checks must be automatic and instant.
These checks may result in a person being offered a lower spending limit or being declined completely. This reduces risk to customers by preventing them from taking on debt they can’t afford to repay, enforcing responsible lending and sustainable borrowing.
Clearer Information Before You Borrow
BNPL providers must supply customers with clear, easy-to-understand information before any borrowing takes place, including details such as how much they’ll repay, due dates, what happens if payments are missed, any fees that may be applied, and if their credit record will be checked
By providing such information, customers can make a more informed decision, compare different payment options, and know exactly what they are agreeing to.
More Support if You Miss Payments
The new regulations will ensure customers are given fairer treatment if they miss repayments due to financial difficulties, with providers expected to have robust processes in place to provide support to anyone who is struggling with repayments.
Support mechanisms include offering manageable repayment arrangements, more transparent information about repayment options, and directing customers to resources such as free debt advice services when necessary. These changes ensure the right level of support is offered to people before their financial issues become more serious.
Easier Complaints
Customers will find it easier to make a formal complaint from the 15th July 2026, as providers must put clear procedures in place for handling any issues and responding within a satisfactory timeframe. If a customer is not satisfied with the outcome, or the complaint hasn’t been resolved, then they will be able to escalate the problem with the Financial Ombudsman Service.
Thanks to this change, consumers can claim refunds and compensation for faulty goods costing more than £100 from the BNPL provider (known as section 75), which is already the case for items bought on a credit card
Who Do the New Rules Apply To?
The new regulations apply to most Buy Now, Pay Later agreements taken out on or after 15 July 2026. This includes many of the interest-free instalment products commonly offered at online and in-store checkouts. Any BNPL agreements taken out before this date will likely continue under the terms and regulations previously agreed.
How Will This Affect Your Credit Score?
Using buy now, pay later will not automatically harm your credit score, but providers may now carry out credit checks as part of the new affordability assessments. These reports may also be passed on to credit reference agencies.
Buy Now, Pay Later vs Credit Cards Compared
The new regulations will bring buy now, pay later more in line with other forms of credit, but some key differences will remain, particularly when compared to traditional credit cards. BNPL is designed for short-term borrowing, and if payments are made on time, no interest is incurred. Whereas credit cards provide credit on an ongoing basis, with interest charged if repayments are not made by the agreed date each month.
Credit cards usually have additional benefits such as purchase protection for eligible purchases, rewards schemes, and more flexible repayment options. This makes them a better option if a customer is looking for more protection and flexibility when borrowing.
Buy Now, Pay Later | Credit Card |
|---|---|
Usually interest-free if repayments are made on time | May charge interest if the balance isn't paid in full |
Typically repaid over a few weeks or months | Ongoing revolving credit with flexible repayments |
Now subject to FCA regulation and affordability checks | Already regulated by the FCA |
Often used for specific purchases at checkout | Can be used for a wide range of purchases |
Consumer protections have increased under the new rules | May offer additional purchase protection, such as Section 75 on eligible purchases |
Potential Downsides to New BNPL Regulations
The obvious downside to the new buy now, pay later regulations is that some people may not be able to access this line of credit if they fail affordability checks. Other applicants may only be offered a lower level of credit than they were looking for compared to what they would have been able to get previously.
Despite the potential disappointment for some customers, these changes reduce the potential risk to customers who are not in a strong financial position. These more responsible lending mechanisms will, of course, limit access to short-term credit for some people but will create a safer borrowing environment long-term.
FAQs
What happens if I miss a buy now, pay later payment?
If you miss a payment, your provider may contact you to discuss your options. Depending on the provider, you could incur fees or your credit record may be affected. Under the new rules, providers are also expected to offer appropriate support to customers experiencing financial difficulties.
Will retailers stop offering BNPL?
No. The new regulations are designed to make BNPL safer, not remove it from the market. Many retailers are expected to continue offering BNPL as a payment option through FCA-authorised providers.
Can I be declined even if I've used BNPL before?
Providers will carry out stronger affordability checks under the new rules, so previous approval doesn't guarantee future applications will be accepted. Your financial circumstances at the time of application will be taken into account.
Does BNPL offer the same protection as a credit card?
In some cases, yes, particularly for purchases that cost over £100 and are faulty under Section 75 of the Consumer Credit Act 1974.
Glossary
Financial Conduct Authority (FCA): The FCA is the UK's financial regulator, which is responsible for overseeing financial firms and protecting consumers.
Financial Ombudsman Service (FOS): An independent organisation that resolves complaints between consumers and financial businesses.
Credit Reference Agency (CRA): An organisation that collects information about your borrowing and repayment history to help lenders assess credit applications.
Section 75 Protection: A legal protection that can make a credit card provider jointly liable with a retailer if something goes wrong, usually for eligible purchases up to £30,000.
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Editorial Disclaimer: This content is provided for general informational purposes only and should not be considered advice. It is not intended to provide personalised recommendations or guarantees of any outcomes.
This content reflects general information at the time of publication and is not endorsed by any company. You should always consider your own circumstances and, where appropriate, seek independent advice before making decisions. Nothing in this content should be interpreted as a recommendation to take, or refrain from taking, any specific action.
Page Last Reviewed: 16/07/2026