Millions of people using buy now, pay later (BNPL) services will benefit from stronger consumer protections from today after new regulations officially came into force across the UK. The new rules apply to some of the country’s most popular BNPL providers, including Klarna, Zilch, Clearpay and PayPal Pay in 3, bringing the sector under tighter regulation for the first time.
The changes are designed to better protect shoppers by ensuring lenders act more responsibly before allowing customers to spread the cost of purchases.
Stronger safeguards for shoppers
Under the new regulations, BNPL providers must now:
- Carry out affordability checks before lending.
- Provide clear and transparent information about repayment terms.
- Offer appropriate support to customers experiencing financial difficulty.
- Ensure consumers understand the risks of using buy now, pay later products.
The move aims to tackle concerns that some consumers have been taking on debt they cannot afford without fully understanding the repayment commitments.
Greater rights for consumers
The new rules also give customers stronger protections if something goes wrong. Consumers will now have access to formal complaints procedures and, where appropriate, be able to escalate disputes to the Financial Ombudsman Service if they are unable to resolve issues directly with their lender.
The regulations also place greater responsibility on BNPL firms to treat customers fairly and identify those who may be struggling financially.
Growing popularity
Buy now, pay later services have become increasingly popular in recent years, allowing shoppers to spread the cost of purchases over several weeks or months without paying interest, provided repayments are made on time.
However, consumer groups have repeatedly warned that the ease of accessing credit has led some people into financial difficulty, particularly during the ongoing cost of living pressures. The Government says the new framework will help strike a balance between allowing consumers to continue using flexible payment options while ensuring stronger safeguards are in place.
The new regulations came into force today, affecting millions of existing and future BNPL users across the UK.
