Consumers seeking refunds for faulty products will now enjoy the same clear and enforceable rights as those purchasing any other regulated financial products. As of today, Buy-Now, Pay-Later (BNPL) firms are mandated to conduct affordability assessments prior to extending credit, ensuring individuals do not borrow beyond their means.
New regulations, effective from July 15, aim to enhance protections for millions of users of BNPL services, fulfilling the government’s pledge to bring order to a previously unregulated sector. These measures are designed to safeguard consumers against the potential pitfalls of BNPL schemes, which have gained popularity for enabling interest-free payment options at online checkouts through providers such as Klarna, PayPal, and Clearpay.
Historically, those utilising BNPL options had fewer rights compared to consumers using credit cards or personal loans, particularly when seeking refunds for defective goods. The introduction of these regulations, overseen by the Financial Conduct Authority (FCA), aligns BNPL products with existing credit frameworks, thereby ensuring consumer protection similar to that afforded by other credit options. The aim is to foster responsible usage of BNPL services while implementing swift and seamless verification processes to avoid unnecessary delays for conscientious users.
New Protections and Consumer Rights
Under the updated guidelines, BNPL providers are required to perform affordability checks before granting credit. This crucial step is intended to prevent consumers from accumulating unsustainable debt by borrowing amounts they cannot comfortably repay. Furthermore, individuals seeking refunds for faulty merchandise will now have explicit and enforceable rights to do so. In cases of financial distress, consumers will be directed towards debt advice and support services rather than being immediately referred to debt collectors.
Rachel Blake, Economic Secretary to the Treasury, emphasised the government’s commitment to enhancing consumer protections, stating, “It is unjust that individuals using these products have been afforded fewer rights compared to those who pay with credit cards. These new regulations are designed to protect consumers by ensuring proper checks are in place prior to credit approval, granting real rights when issues arise, and offering support rather than pressure for those facing financial difficulties.”
Martin Lewis, Founder of MoneySavingExpert.com, acknowledged the potential benefits of BNPL when utilised responsibly. He noted that while BNPL can be advantageous for individuals who understand its implications and choose to spread costs over a few months interest-free, many users fall into the trap of constant usage, leading to excessive and unmanageable debt. Lewis has been a vocal advocate for the regulation of this sector, highlighting the necessity of clearer consumer protections.
Focus on Responsible Borrowing
According to Lewis, the primary aim of these regulatory changes is to ensure that BNPL services are marketed responsibly and that consumers are protected in the event of complications, which can have severe consequences. Notably, consumers will now have the option to appeal to the independent Financial Ombudsman Service for issues such as erroneous credit file entries or instances of mis-sold BNPL agreements.
Rocio Concha, Director of Policy and Advocacy at Which?, expressed satisfaction with the new regulations, which were the result of extensive campaigning for increased oversight of BNPL providers. The new legislation will allow for greater access to the Financial Ombudsman Service, clearer information during the checkout process, and affordability checks to prevent consumers from incurring debts they cannot manage. Concha advised shoppers to carefully consider their ability to meet repayment obligations before opting for BNPL and to fully understand the ramifications of missed payments.
Addressing Debt Concerns
Vikki Brownridge, Chief Executive Officer at StepChange Debt Charity, welcomed the new consumer protections, noting that while BNPL can facilitate the management of larger expenses, it also poses risks for users who are more likely to experience debt problems. Aligning BNPL products with other consumer credit offerings is a significant step towards providing borrowers with stronger safeguards and instilling greater confidence in their usage.
Alison Walters, Director of Consumer Finance at the FCA, reaffirmed that millions of individuals utilising BNPL services will now benefit from enhanced protections, including affordability checks, clearer information, and improved support in cases of financial difficulty. Consumers will also have the right to lodge complaints with the Financial Ombudsman Service should issues arise.
The Growth of Buy-Now, Pay-Later
As the BNPL sector has expanded rapidly in recent years, it has attracted millions of users, including a significant number from lower-income demographics. Until now, these consumers have lacked the essential protections associated with traditional credit forms. In October 2024, the government announced its intention to introduce regulation for BNPL services, with legislation passed in July 2025 to implement new rules by 2026. Today’s announcement signifies the fulfilment of that commitment, placing the FCA in charge of regulating the sector.