The UK’s new regulations for buy-now-pay-later (BNPL) will look to ensure consumer affordability is at the forefront of providers’ minds.
Today (15 July), the UK is introducing its first regulations around buy-now-pay-later (BNPL) in a bid to protect consumers with more transparent guidelines.
The regulations, enforced by the Financial Conduct Authority (FCA), have been in the works for the last several years, as BNPL has fast become one of the country’s most popular payment methods post-Covid.
Until now, the UK’s BNPL sector has represented a form of unregulated credit, and the market has been dominated by the likes of Klarna, Affirm and ClearPay.
New rules come into force to mitigate consumer affordability concerns, ensuring those who take out short-term credit, typically over 3 months, can pay off their debts.
Announced in February 2026, the FCA confirmed it will address these concerns by enforcing BNPL regulations under the Consumer Duty, providing safeguards for the 11 million British consumers that use bNPL.
Speaking at the time of the announcement, Sarah Pritchard, Deputy Chief Executive at the FCA, said: “We want the BNPL 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.”
What are the UK’s new BNPL regulations?
Under the UK’s new regulations for the BNPL sector, companies must now carry out proportionate affordability checks to ensure consumers can afford to repay what they are lent. This should be in place before they can offer their BNPL services.
Consumers will now be provided with clear and transparent payment details; the full amount to be paid, when the instalment payments should be made, and what the penalties are if payments are missed.
BNPL lenders are also required to offer sufficient support to consumers who may find themselves in financial difficulty when repaying the loan. They should be directed to a free debt advice service.
If an instalment payment fails or is not processed correctly, consumers will now be able to flag this and lodge a complaint with the Financial Ombudsman Service.
UK firms operating in the country have had between the 15 May 2026-1 July 2026 to put these measures in place. BNPL firms have six months (starting today) to apply for full authorisation with the FCA to operate under the new regulations.
The FCA has told consumers they should consider their personal finances when contemplating using BNPL and whether they can afford it, before going through the process with the provider.
BNPL rules coming in at a timely manner
Research from Park Christmas Savings has found 75% of 3,000 UK households believe they were encouraged to use BNPL to spend beyond their planned budget for Christmas last year.
More than a third (35%) said they later regretted using the payment method, while 37% said repayments continued for between three and six months beyond the original repayment period.
As Christmas is typically the season for BNPL usage in the UK, as consumers are aiming to stretch budgets with multiple purchases for family and friends, Park Christmas Savings’ data reveals many are still paying off instalment payments from last December.
Almost a quarter (23%) of respondents said they were still paying off Christmas-related BNPL borrowing a year later. The survey also found that 15% of respondents are still paying off Christmas 2025 spending of some kind.
Amy Peebles, family budgeting expert at Park Christmas Savings, said: “The introduction of FCA regulation is an important step in improving consumer protection for people using Buy Now Pay Later products.
“While today’s changes introduce important safeguards, our findings also highlight the value of planning ahead and spreading costs throughout the year, helping households avoid relying on credit during the festive period.”
Industry comments
For companies like PayPal, which launched its new ‘Pay in 3’ BNPL product in the UK in 2020, the new regulations have been a long time coming.
Tamer El-Emary, UK General Manager for PayPal, tells Payment Expert he expects there to be minimal changes for how businesses operate using their Pay in 3 service, but it does ensure long-term growth can be carried out sustainably.
“We’ve long shared our support for proportionate BNPL regulation and, like the British businesses we’ve heard from, believe it will help strengthen confidence in the payment category while supporting long term, sustainable growth,” says El-Emary.
“We are well prepared for the new requirements, with many of them reflecting practices we’ve had in place for some time, so we don’t expect to see any changes in our conversion rates.”
For relative newcomers to the UK’s BNPL sector, such as global provider Affirm which launched in the UK in November 2024, the new regulations represent a form of support for new entrants in the market.
Speaking to Payment Expert, Ruth Spratt, UK Country Manager for Affirm, said:
“These new rules are a big win for the millions of people using BNPL in the UK.
“Consistent standards give people greater confidence when they choose to use BNPL, which is why we’ve not only supported regulation from the get-go, but go beyond the rules by never charging late fees – a policy other lenders should adopt.”
Radi El Haj, CEO of RS2, is looking at the UK’s BNPL regulations from a different lens.
He is drawing parallels between the UK’s new rules and the European Union’s (EU) Consumer Credit Directive, as the “regulatory gap between UK and EU markets is narrowing rather than widening”.
This is welcomed by El Haj, who tells Payment Expert affordability checks have moved from box-ticking exercises and many a design problem causing user friction. Now fully integrated into the BNPL payment journey, El Haj wants these checks to be as seamless as possible to ensure a smooth user experience.
“Affordability checks can’t be a separate step tacked onto checkout – that’s where lenders will lose customers,” says El Haj. “They need to happen instantly, as part of the transaction itself, using the same real-time data lenders already rely on for fraud checks. Do that well and the customer barely notices. Do it badly and they abandon the basket.
“We saw something similar play out with PSD2 and Strong Customer Authentication a few years back. Plenty of firms treated it as a box-ticking exercise and ended up with checkouts that dropped customers left and right.
“The firms that treated it as a design problem came out the other side with smoother journeys than they started with. I’d expect the BNPL regulations to sort providers the same way.”
