Starting from July, customers using buy now, pay later services will be subject to affordability assessments and will receive enhanced protections in case of issues. The sector will be regulated by the Financial Conduct Authority (FCA) from July 15, 2026. Clear and detailed information on payment schedules, amounts due, and consequences of missed payments must be provided to users.
Buy now, pay later providers will be required to conduct checks to ensure borrowers can afford repayments. Additionally, assistance must be available for customers facing financial challenges, including guidance towards free debt advice services. Users will have the option to escalate complaints to the Financial Ombudsman Service (FOS) if they feel unfairly treated.
Lenders must obtain authorization from the regulator and adhere to Consumer Duty rules, which elevate consumer protection standards in UK financial services. Companies will have a six-month window from the implementation date to seek full authorization.
Although buy now, pay later facilitates spreading out purchase costs, concerns have been raised about potential debt issues. The FCA reported a market growth to £13 billion in 2024, with 10.9 million adults utilizing such services in the year leading up to May 2024.
Sarah Pritchard, the FCA’s deputy chief executive, emphasized the importance of responsible lending to prevent worsening individuals’ financial situations. The FCA aims to implement balanced safeguards for the millions benefiting from buy now, pay later services.
Peter Tutton from StepChange Debt Charity highlighted the benefits of buy now, pay later while cautioning about repayment challenges. The introduction of FCA regulations aims to mitigate financial risks and ensure consistent support for users, with access to the Financial Ombudsman if needed. Users are advised to verify affordability and seek debt advice if repayment difficulties arise.