Buy Now, Pay Later (BNPL) products have become a common feature of online and in-store checkouts, allowing consumers to spread the cost of purchases over several instalments without paying interest if repayments are made on time. According to Citizens Advice, their convenience has also made it easier for some people to spend more than they intended without fully recognising the level of borrowing involved.
The reforms are intended to introduce protections comparable to those available for other forms of consumer credit. At the same time, existing agreements made before 15 July will generally remain outside the new regulatory framework, creating a distinction between older and newer purchases.
New FCA Rules Introduce Affordability Checks and Clearer Borrowing Information
From 15 July, providers offering Deferred Payment Credit (DPC), the interest-free form of BNPL repayable in 12 or fewer instalments over no more than 12 months, must be authorised by the FCA. According to the Financial Conduct Authority, these products have previously operated outside its regulatory framework.
Under the new rules, lenders must carry out proportionate affordability checks for every purchase, including transactions worth less than £50, rather than relying solely on checks completed when a customer first opens an account. They must also provide clear information explaining repayment amounts, payment dates, the consequences of missed instalments and customers’ rights before an agreement is completed.
Providers are also required to notify customers immediately after a missed repayment, explaining the amount owed, the consequences of non-payment and the steps available to address the situation. Purchases valued at more than £100 and up to £30,000 will also benefit from Section 75 protection, bringing BNPL into line with the protections already associated with credit cards for qualifying purchases.
Martin Lewis, quoted by Citizens Advice, said he had long supported regulation of the sector because BNPL “is a debt” and should receive the same protections as other forms of borrowing, while noting that some safeguards, including access to the Financial Ombudsman Service, will not be available until at least a year after the rules begin.
Existing Agreements Remain Subject to Previous Arrangements
While the reforms introduce new standards for future borrowing, agreements entered into before 15 July will generally not receive the new protections automatically. According to the FCA, the updated regulatory requirements apply only to agreements made from the implementation date onwards.
Thomas Drury, a money-saving specialist at The Investors Centre, said this could lead to confusion for consumers who have several BNPL purchases taken out at different times. He noted that two purchases made through the same provider either side of 15 July may appear similar but may be covered by different regulatory protections.
Drury also said consumers should understand that stronger regulation does not remove the financial responsibilities associated with borrowing. He advised shoppers to review outstanding repayment plans, understand when payments leave their accounts and be aware of which agreements were entered into before the rule change.
According to Citizens Advice, BNPL can make it easier for people to buy what they want without fully realising how much they are spending. The organisation says the new rules are designed to provide greater protection by improving transparency, requiring affordability assessments and ensuring consumers are directed towards free debt advice where appropriate.
