UK BNPL Sector Gains FCA Consumer Protections From July

New regulations coming into force in July 2025 will require buy now, pay later (BNPL) providers to conduct stricter affordability checks to prevent consumers from taking on unsustainable debt. These rules will bring BNPL under the oversight of the Financial Conduct Authority (FCA), offering users protections similar to other credit products, including support for those facing financial difficulties and the ability to escalate complaints to the Financial Ombudsman Service. The FCA's measures aim to increase transparency around repayment terms, fees, and credit score implications, while also requiring lenders to provide tailored support for borrowers struggling to repay. BNPL has grown in popularity, with about 20% of UK adults using these services, often for lifestyle and beauty purchases, but concerns have risen as many users accumulate unregulated debt. Charities like StepChange welcome the new rules, emphasizing the importance of informed borrowing, early advice for those in difficulty, and the need to understand the terms and consequences of missing payments. Market leaders such as Klarna and Clearpay support the regulatory changes, which also include bringing BNPL under the Consumer Credit Act protections, allowing consumers to claim refunds or compensation for faulty goods.