Businesses face tighter controls on their Buy-Now, Pay-Later offers

The UK government is proposing tougher regulations on Buy-Now, Pay-Later (BNPL) products, aiming to bring them under Financial Conduct Authority oversight. The new rules will require BNPL companies to assess affordability, provide clearer terms, and give users stronger rights, with legislation expected by early 2025.

Businesses are to face tougher regulations on Buy-Now, Pay-Later products. Such products have become increasingly popular in recent years as they allow people to spread the cost of purchases over time, but users currently do not have access to a range of key protections provided by other consumer credit offers.

The Government has launched a consultation on proposals to fix this by bringing Buy-Now, Pay-Later companies under the supervision of the Financial Conduct Authority (FCA) and applying the Consumer Credit Act, ensuring users receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise. 

Economic Secretary to the Treasury Tulip Siddiq said: “Millions of people use Buy-Now, Pay-Later to manage their finances. Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow.

“The new rules will allow the FCA to apply rules on affordability – meaning that Buy-Now, Pay-Later companies will have to check that shoppers are able to afford repayments before offering a loan, which will help to prevent people building up unmanageable debt.

“Companies will also need to provide clear, simple and accessible information about loan agreements in advance so that shoppers can make fully informed decisions and understand the risks associated with late repayments.

“Consumer Credit Act information disclosure rules will be disapplied so that the FCA can consult on bespoke rules that ensure users are given this information in a way that is tailored to the online setting in which Buy-Now, Pay-Later products are generally used.   

“Buy-Now, Pay-Later users will be given stronger rights if issues arise with products they purchase, making it quicker and easier to get redress. This includes applying Section 75 of the Consumer Credit Act, which allows consumers to claim refunds from their lender, and access to the Financial Ombudsman Service to make complaints.”

The consultation will be conducted quickly, closing on 29 November.

Final legislation is expected to be laid in Parliament in early 2025. Once the legislation is laid, the FCA will finalise the rules so they can take effect in 2026 – bringing clarity to the sector after years of uncertainty about how it will be regulated.

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