The United Kingdom Government has unveiled new regulations targeting the rapidly growing buy now, pay later sector, aiming to protect consumers and curb unsustainable borrowing.
The legislation, announced today, mandates affordability checks by lenders to prevent excessive debt accumulation and ensures faster refund processes for shoppers, according to BBC News.
The BNPL market has exploded in popularity, with an estimated 11 million UK consumers using these services in the past year to split purchase costs into smaller, short-term payments, typically over weeks or months.
However, concerns have mounted over unchecked spending, with some users accumulating debt they struggle to repay.
Consumer advocacy groups, including Citizens Advice, praised the reforms as a “crucial step” toward safeguarding shoppers, noting that many users fail to recognize BNPL as a form of debt.
“For too long, people have been exposed to unaffordable debt from a BNPL sector that has operated in a regulatory grey area,” said Tom MacInnes, director of policy at Citizens Advice.
“For some, this has had dire consequences. Many people are struggling to repay credit they can’t afford, falling behind on essential bills and often needing emergency support, like food bank vouchers.”
For years, stricter oversight of the sector has been under discussion, with the previous government announcing plans in 2023.
The new legislation, set to take effect next year, mandates that BNPL firms adhere to uniform standards.
This ensures shoppers understand their commitments, can assess affordability, and know how to seek assistance if needed.
Key measures include mandatory affordability checks, quicker refund processes, and the ability to escalate complaints to the Financial Ombudsman.
Emma Reynolds, economic secretary to the Treasury, said BNPL had “transformed shopping for millions”, but had left consumers exposed and operated as a “wild west”.
“These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs,” she added.
Last week, the UK’s Financial Conduct Authority revealed that the number of people using Buy Now, Pay Later services has increased significantly, adding two million users over the past three years.
The survey found that 40% of lone parents and 35% of women aged 25 to 34 currently use BNPL products.
