The UK government is introducing new regulations requiring Buy Now, Pay Later (BNPL) providers to conduct affordability checks and ensure faster refunds for consumers. These measures aim to curb rising debt levels among shoppers who use this increasingly popular payment method.
BNPL services allow customers to split payments over time, often without interest. While convenient, the sector has operated largely outside financial regulation, raising concerns about consumers accumulating unmanageable debt. The upcoming legislation intends to close this gap by introducing clear consumer protection standards.
Affordability Checks to Prevent Excessive Consumer Debt
Under the new legislation, BNPL providers will be legally obligated to assess customers’ ability to repay before offering credit. This requirement seeks to prevent shoppers from taking on debt beyond their means, addressing growing worries about financial hardship linked to BNPL usage.
According to a spokesperson from Clearpay, a major BNPL provider, the government’s finalisation of BNPL regulations will bring much-needed clarity and consistency to the sector.
The spokesperson highlighted that nearly half of UK adults (48%) are likely to use Buy Now, Pay Later services more frequently once these rules are in place, with 71% of respondents indicating they believe BNPL should be regulated by UK financial legislation. This points to a growing public demand for consumer safeguards and responsible lending practices.
Emma Reynolds, Labour Party minister and economic secretary to the Treasury, described the sector as a “wild west” and acknowledged the risk of debt traps. She said the new rules will protect shoppers and provide the industry with the certainty required to invest, grow, and create jobs.
Quicker Refunds and Enhanced Consumer Protections
The legislation also focuses on improving the speed and ease of refunds for BNPL users. Currently, many shoppers experience delays when disputing purchases or requesting repayments, which can exacerbate financial strain.
Consumer advocacy groups have welcomed the changes. According to Tom MacInnes, director of policy at Citizens Advice, BNPL has operated in a regulatory grey area for too long, exposing people to unaffordable credit.
He emphasised that some individuals have faced serious consequences, including difficulty in paying essential bills and reliance on emergency aid.
Klarna, one of the UK’s largest Buy Now, Pay Later providers, has supported regulation since 2020. A spokesperson stated their intention to collaborate with the Financial Conduct Authority (FCA) to establish rules that both protect consumers and foster innovation within the sector.
