BNPL landmark regulation begins – industry reaction

The Buy Now, Pay Later (BNPL) sector will come under the regulation of the Financial Conduct Authority (FCA) from today (Wednesday 15th July), seeing the launch of stronger protections in place for consumers.

New YouGov polling commissioned by StepChange reveals the increasing popularity of BNPL products, but raises the concern that many are using it to cover essentials costs. In July 2026, 4% of UK adults said they have used BNPL to pay for essentials in the last three months, equivalent to around 2.2 million people. This is broadly on a par with people using loans from family or friends (4%) and overdrafts (5%).

The charity says the new rules will help to ensure customers don’t fall into difficulties with debt when using BNPL products but has highlighted a couple of potential areas where the regulator can strengthen its approach in future.

Peter Tutton, Director of Policy, Research and Public Affairs at StepChange, said “It’s a landmark moment to see the Buy Now, Pay Later (BNPL) sector regulated after years of campaigning by StepChange and other consumer groups. BNPL can be a helpful way for consumers to spread the cost of purchases, particularly as it is typically interest-free and designed for short-term borrowing. However, our experience shows that people using it are more likely to be facing debt problems and can be at greater risk of falling behind on payments and incurring additional charges.

“Consumers will still be able to use BNPL much as they do today, but with stronger protections. Lenders will need to carry out better affordability checks, provide clearer information, and offer support to customers in financial difficulty – including signposting to debt advice. Customers will also gain access to the Financial Ombudsman Service.

“One area where we would welcome further safeguards is around the ability for people to take out multiple BNPL agreements simultaneously. On occasions we have supported clients with dozens of separate BNPL debts, which highlights weaknesses in the current system that can allow debt to build up across several providers without sufficient checks in place.

“We’d also like the FCA to do more to tackle low-friction borrowing and the exploitation of behavioural biases in product design. While mandating key pre-contractual information is a positive step, it does not give consumers sufficient opportunity to reflect before borrowing, particularly those experiencing financial difficulty or mental health challenges. We’ve called on the FCA to use its Consumer Duty rules to set clearer expectations for firms.”

Meanwhile, National Debtline has seen a six-fold increase people struggling with Buy Now, Pay Later debt, up from just 3% of people seeking the charity’s support in 2021 to 18% in 2026, with the average debt now standing at £1,029. The charity says the new figures are further evidence of the importance of new regulations.The changes will introduce important safeguards including affordability checks, clearer information about borrowing, greater support for people experiencing financial difficulties and access to the Financial Ombudsman Service for complaints about regulated BNPL agreements.

Steve Vaid, Chief Executive of the Money Advice Trust, said “Buy Now, Pay Later users have been left without adequate protections for too long. The rapid growth in number of problems we see shows how desperately these reforms have been needed.

“Bringing BNPL in line with other forms of credit is a vital step to ensuring that people can’t build unsustainable levels of debt, that they get better support if they are in financial difficulty and have better routes to complain when things go wrong. The ultimate test of these rules will be whether our advisers start seeing fewer people struggling with BNPL debts.”

Luke Seaman, Head of Global Policy, Klarna, said  “Klarna has prepared for regulation since calling for it in 2020, so we welcome this moment. The FCA’s rules largely formalise what we already do: we run affordability checks, show costs up front and treat customers well. Our survey shows Brits welcome new protections like section 75 and Financial Ombudsman access; this regulation gives them several huge new reasons to ditch the credit card, especially for larger purchases.”

Kate Pender, CEO at Fair4All Finance said “New Buy Now Pay Later regulation could create a credit cliff-edge for up to 30% of current BNPL users. While regulation is clearly needed and welcomed, our recent research found that nearly half of those likely to be rejected have not missed a BNPL payment, so there’s a real risk that many people who currently use BNPL responsibly could be unfairly excluded. The need for credit doesn’t just disappear when you can’t access it and people are often pushed towards more expensive or unregulated alternatives, including high-cost credit or illegal money lenders.

“Regulation should be the first step, not the finish line. As an industry we need to explore new ways of lending and opening up credit for people that need it most, where it’s affordable and appropriate. Millions of people’s credit needs can often be small, just a few hundred pounds. The option to borrow these small sums of money can make a huge difference, helping people manage unexpected costs and build their financial resilience.

“However there’s a £2bn supply gap in the market for this type of lending. Our recently launched Small Sum Lending pilot, in partnership with Monzo, is aiming to help fill that gap by making small amounts of affordable credit accessible to more people. And there’s more the wider banking industry can do to increase access to affordable credit.

“BNPL isn’t the main driver of financial distress; it’s a symptom. Treating all small sum credit as ‘high risk’ is a mistake. It leaves an untapped market to the least affordable lenders, just when people need safe credit most. Open banking and AI enabled lending can make a massive difference to understanding risk better and pricing more accurately.”

Rich Evans, credit risk solutions specialist at LexisNexis Risk Solutions said “The Buy Now Pay Later regulation marks an important milestone for the UK credit market. It rightly brings greater consumer protection, stronger affordability checks and much-needed transparency to a product that has become part of everyday life for millions of people.

“However, the importance transcends regulation itself. Since BNPL borrowing has historically existed outside the mainstream credit ecosystem, millions of consumers who have been managing their credit behaviours well weren’t seeing any benefit reflected in their credit profile. Bringing this data into credit decisioning gives lenders a fuller picture of financial behaviour and crucially, it now helps give responsible borrowers the credit they deserve.

“This move into the mainstream has the potential to make a real difference to the financial inclusion of millions of people in the UK. Today, more than seven million UK adults are experiencing significant financial stress. Around 2.9 million* people are considered financially excluded, while a further 2.4 million have been unable to secure any type of short-term loan despite making multiple applications. For many people with thin or limited credit files, a history of consistently repaying BNPL could become the evidence they need to demonstrate their creditworthiness.

“More comprehensive credit profiles create better outcomes. It helps lenders make more accurate, more confident decisions, while opening the door for more consumers to access fair, affordable credit and protecting consumers who overutilize BNPL. That’s a win for responsible borrowers, a win for lenders and, ultimately, a win for the health of the UK’s credit market.”

Matt Bland, Chief Executive of All Together Money, said  “The introduction of regulation for Buy Now, Pay Later products is an important and welcome step for consumers. As these products have grown in popularity, it is right that protections for borrowers have grown alongside them.”

“Affordability checks and clearer information will help consumers make more informed decisions about borrowing and reduce the risk of people taking on debt they cannot afford.”

“However, we must also consider where consumers who may no longer qualify for some BNPL products will turn for support. There is a risk that some could be pushed towards higher-cost forms of credit if affordable alternatives are not available.”

“Credit unions are well placed to help meet this need, providing responsible, affordable lending alongside savings products and financial support that help people build longer-term financial resilience.”

“We are also encouraged by the innovation taking place across the affordable credit sector, supported by funding and investment programmes through organisations such as Fair4All Finance, which are helping credit unions modernise and develop products that better meet the needs of today’s consumers.”

A spokesperson from the Finance & Leasing Association (FLA) said “The FLA has argued that there should be a level playing field for all consumer credit customers, so everyone is subject to affordability checks, can access support if they get into difficulty and can complain to the Financial Ombudsman if things go wrong.  

“We have worked closely with the Government and lenders on a regulatory framework which is fair and proportionate – allowing the BNPL market to thrive while also delivering good outcomes for customers.”

A spokesperson from Clearpay said “Clearpay welcomes Buy Now, Pay Later (BNPL) regulation that comes into effect today, which will help establish a consistent operating environment and clear standards for all providers.

“Millions of consumers rely on BNPL for short-term and interest free credit to make everyday purchases. We will continue to provide our existing safeguards that customers have long valued, including pausing accounts if a single payment is missed and capped late fees. Now they will also have access to important protections like Section 75, creditworthiness checks and access to the Financial Ombudsman Service.

“From a retailer perspective, they have long relied upon BNPL as a flexible payment option to attract new customers and retain existing ones. Now, they can continue to offer this innovative service, knowing that sector-wide protections are in place.”