The long-awaited buy now, pay later (BNPL) rules will come into force from 15 July 2026, the Financial Conduct Authority (FCA) has announced.
From then on, borrowers who use services like Klarna, Clearpay and PayPal’s ‘Pay in 3’ option will benefit from stronger protection.
BNPL allows users to split their payments into interest-free instalments.
However, borrowers currently have very limited protection as the sector is not yet regulated by the FCA.
The government first announced that it would regulate BNPL back in January 2021.
What is changing?
After repeated delays, firms will soon be required to carry out affordability checks, offer support to customers in financial difficulty and provide clear information about what borrowers are agreeing to.
Importantly, customers will also be able to escalate complaints to the Financial Ombudsman Service if things go wrong. Lenders will only be allowed to continue to provide BNPL if they are authorised by the FCA.
Sarah Pritchard, deputy chief executive at the FCA, said: “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. Now parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.”
The details have been welcomed by the debt charity StepChange, which has been campaigning for regulation for several years. Peter Tutton, director of policy, research and public affairs at StepChange, said:
“Buy Now, Pay Later can be a helpful way for people to spread costs. But like any form of credit, it carries risks when repayments become difficult. The absence of FCA regulation until now has only heightened the risk of financial harm for those relying on BNPL.
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“We would urge anyone using BNPL to always double check that the repayments will be affordable, and if you are struggling to repay – free and impartial debt advice is available from charities like StepChange.”
How to use buy now, pay later responsibly
When used correctly, BNPL can be an affordable way of accessing credit. But it’s easy to overuse it and end up falling into unmanageable debt, especially since it’s still unregulated for the time being.
Before you checkout using BNPL, it’s a good idea to ask yourself whether you would have made the purchase even if Klarna, Clearpay or PayPal’s Pay in 3 were not available. This can help you work out whether you’re spending impulsively.
If you wouldn’t be able to afford the purchase without using BNPL, this might be an indication that you’ll struggle to make your repayments. Missing payments can result in additional fees and could damage your credit score.
Dr Donna Mai, principal lecturer in marketing management at the University of Westminster, said: “Users should consider the timing and total impact of repayments alongside existing financial commitments, ensure sufficient funds are available, and set reminders to avoid missed payments.”
She also recommends sticking to just one BNPL provider. “Limiting the number of concurrent BNPL agreements is important, avoiding use across multiple providers when the providers cannot conduct proper checks,” she said.