Buy Now, Pay Later: What the New Regulations Mean for Your Finances

The way we shop online has been transformed by the rapid rise of “Buy Now, Pay Later” (BNPL) services. Offering the ability to split purchases into interest-free instalments, these services have become incredibly popular. However, concerns about rising debt levels have led to a major shift: BNPL is now officially regulated.

The Growth of Buy Now, Pay Later

The appeal of BNPL is obvious—it provides immediate gratification without the immediate financial hit. According to The Money Charity [1], the BNPL market has exploded in recent years, growing from £60 million in 2017 to over £13 billion in 2024. In the year to May 2024 alone, 10.9 million UK adults (20% of the population) used this form of credit.

However, this convenience comes with risks. Because BNPL has historically been unregulated, it was easy for consumers to accumulate multiple debts across different providers without adequate affordability checks, leading to concerns about a hidden debt crisis.

What the New Regulations Change

As of 15 July 2026, third-party BNPL products (such as Klarna and Clearpay) are regulated by the Financial Conduct Authority (FCA). This brings them in line with other forms of consumer credit, offering much-needed protections [2].

Here is what the new rules mean for you:

• Stricter Affordability Checks: Providers must now conduct proportionate checks to ensure you can actually afford the repayments. This may involve soft or hard credit checks, which could impact your credit score.
• Clearer Information: The terms of the agreement, including repayment schedules and late fees, must be communicated clearly and transparently.
• Consumer Protection: You now have the right to escalate complaints to the Financial Ombudsman Service if things go wrong. Furthermore, Section 75 protection (which holds the credit provider jointly liable with the retailer if goods are faulty or not delivered) has been extended to new purchases between £100 and £30,000 made via regulated BNPL providers.

The Risks That Remain

While regulation is a positive step, it does not eliminate the risks associated with BNPL.

It is crucial to remember that BNPL is still a form of debt. The Money Charity notes that these new rules come against a backdrop of continued growth in consumer borrowing, with outstanding consumer credit increasing by 7.0% in the year to May 2026 [1].

“Regulation offers a safety net. It does not do your budgeting for you.”

The ease of use at the online checkout means it remains simple to overcommit. Keeping track of multiple repayment schedules across different providers can quickly become overwhelming, and late fees can still add up if you miss a payment. The risk of “debt stacking”—using credit cards to pay off BNPL debts—remains a serious concern.

BNPL can be a useful tool if managed carefully, but it requires discipline. The new regulations offer a safety net, but the responsibility for budgeting and managing repayments still rests with the consumer.

If Repayments Are Becoming a Struggle

If BNPL commitments or other borrowing are starting to cause you real difficulty, please do not wait until you have missed a payment. StepChange, the UK's leading debt charity, offers free, confidential and impartial advice. You can reach them at www.stepchange.org or on 0800 138 1111.

Think clearly. Break through the jargon.

References

1. The Money Charity. “The Money Stats – July 2026.”
2. The Money Charity. “New Buy Now Pay Later Regulation Explained: What It Means for Consumers.”