Starting July, buy now, pay later customers will be subject to affordability assessments and will receive enhanced consumer safeguards if issues arise. The buy now, pay later sector will fall under the regulatory oversight of the Financial Conduct Authority (FCA) effective July 15, 2026. Ensuring transparency, users will be provided with comprehensive details upfront, including payment schedules, amounts due, and consequences of missed payments.
Furthermore, buy now, pay later lenders must conduct thorough affordability checks to confirm borrowers’ ability to repay their loans. In cases of financial distress, customers will receive assistance, including guidance on accessing free debt advice services. Users will have the right to escalate complaints to the Financial Ombudsman Service (FOS) if they believe they have been treated unfairly.
Under the new rules, buy now, pay later providers must obtain authorization from the regulator and adhere to Consumer Duty regulations, which elevate consumer protection standards in the UK financial industry. Firms will have a six-month window to seek full authorization after the regulations take effect.
Despite enabling individuals to spread out purchase costs, the buy now, pay later industry has faced criticism for potentially leading consumers into unmanageable debt situations. In 2024, the market size reached £13 billion, with 10.9 million adults utilizing buy now, pay later services in the preceding 12 months.
Sarah Pritchard, FCA’s deputy chief executive, emphasized the importance of responsible lending practices to avoid exacerbating borrowers’ financial challenges. With the expanded regulatory powers granted by Parliament, the FCA aims to implement proportional protections for the millions of individuals relying on buy now, pay later services.
Peter Tutton, director at StepChange Debt Charity, highlighted the benefits and risks associated with buy now, pay later options. He stressed the significance of the new regulations in safeguarding consumers through affordability checks, ongoing support, and recourse to the Financial Ombudsman in case of issues. Tutton recommended individuals using buy now, pay later services to ensure payment affordability and seek assistance from organizations like StepChange if facing repayment difficulties.