Buy now, pay later consumers are set to receive enhanced protection starting in July, including affordability assessments and access to assistance in case of issues. The Financial Conduct Authority (FCA) will begin regulating the sector from July 15, 2026. Customers using buy now, pay later services after this date will be provided with clear and upfront information regarding their agreements, detailing payment schedules, amounts due, and consequences of missed payments.
Furthermore, buy now, pay later lenders will be obligated to conduct affordability checks to ensure borrowers can repay their loans. They must also offer support to customers facing financial difficulties, guiding them to free debt advice services.
Users of buy now, pay later services will have the right to lodge complaints with the Financial Ombudsman Service (FOS) if they feel unfairly treated. Lenders seeking authorization from the regulator will need to adhere to Consumer Duty rules, which raise the standards of consumer protection in the UK financial services sector. Firms will have six months from the enforcement date to apply for full authorization.
While buy now, pay later options allow for spreading the cost of purchases, concerns have been raised about individuals taking on unmanageable debt. The FCA reported that the buy now, pay later market expanded to £13 billion in 2024, with 10.9 million adults utilizing such services in the preceding 12 months.
Sarah Pritchard, FCA’s deputy chief executive, emphasized the importance of responsible lending practices, stating that while the sector plays a crucial role in providing credit, lending should not exacerbate borrowers’ financial situations. She highlighted the introduction of proportionate protections for the 11 million users of buy now, pay later services.
Peter Tutton, from StepChange Debt Charity, acknowledged the benefits of buy now, pay later but cautioned about the risks associated with financial difficulties. He stressed the significance of the new regulations in safeguarding consumers through affordability checks, ongoing support from lenders, and access to the Financial Ombudsman in case of issues. Tutton advised users to ensure repayments are manageable and to seek assistance from organizations like StepChange in case of repayment challenges.