Major Regulatory Overhaul for Buy Now Pay Later Sector Announced
The United Kingdom is set to implement comprehensive new regulations for the rapidly growing Buy Now Pay Later (BNPL) industry, with the Financial Conduct Authority (FCA) assuming formal oversight from July 15, 2026. This landmark regulatory shift aims to address growing concerns about consumer debt and establish consistent standards across the credit sector.
Enhanced Consumer Protections and Affordability Requirements
Under the forthcoming regulatory framework, BNPL providers will be legally required to conduct proportionate affordability assessments before approving transactions. This represents a fundamental change from current practices, where many providers have operated without mandatory credit checks. The new rules will mandate that lenders verify a consumer's ability to repay before allowing them to complete purchases through BNPL arrangements.
For the first time in the sector's history, BNPL users will gain access to formal complaint resolution mechanisms through the Financial Ombudsman Service. This crucial development provides consumers with an independent avenue for addressing disputes and seeking redress when issues arise with BNPL agreements.
Industry Alignment with Traditional Credit Standards
The regulatory changes will bring BNPL providers under the same stringent requirements that govern traditional financial institutions, including:
- High street banks
- Credit card companies
- Other regulated lenders
This alignment ensures consistent consumer protection standards across all forms of credit, eliminating regulatory gaps that have allowed BNPL products to operate under different rules than conventional credit options.
Regulatory Perspective and Consumer Advocacy
Sarah Pritchard, Deputy Chief Executive at the FCA, emphasised the balanced approach behind the new regulations: "We want the Buy Now Pay Later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they're unable to repay because that could worsen their financial situation."
Consumer advocacy organisations have welcomed the regulatory changes after years of campaigning. Rocio Concha, Which? Director of Policy and Advocacy, noted: "Buy now pay later has become a popular payment method for many consumers – especially for those managing tighter budgets. However, because it has so far been unregulated, consumers paying this way haven't been made sufficiently aware of the risks attached with this form of credit."
Anne Pardoe, Head of Policy at Citizens Advice, reinforced the urgency of these protections, stating they "couldn't come soon enough" for vulnerable consumers who have faced financial difficulties due to unregulated BNPL arrangements.
Impact on the Financial Landscape
The regulatory changes will affect approximately 11 million consumers who currently use BNPL services in the UK. The new framework addresses several critical areas:
- Enhanced transparency about repayment terms and potential fees
- Clearer communication of risks associated with BNPL credit
- Standardised affordability assessments across providers
- Formal complaint resolution processes for consumers
This comprehensive regulatory approach represents a significant milestone in consumer financial protection, bringing innovative credit products under appropriate oversight while maintaining their availability to consumers who benefit from responsible use.
