New rules to crack down on Buy-Now, Pay-Later lending
Buy-Now, Pay-Later (BNPL) products will be brought under formal regulation for the first time, with new rules announced by HM Treasury today set to give over 10 million users stronger protections and clearer information when borrowing.
The reforms aim to end what the UK government called the “wild west” of unregulated credit, where consumers have been left vulnerable to unaffordable debt and poor complaint handling.
From next year, BNPL providers will be required to carry out upfront affordability checks, provide fair and transparent information, and offer faster access to refunds.
Economic Secretary to the Treasury Emma Reynolds said: “Buy-Now, Pay-Later has transformed shopping for millions, but for too long has operated as a wild west – leaving consumers exposed.
“These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs through our Plan for Change.”
Under the plans, BNPL customers will also have the right to escalate complaints to the Financial Ombudsman Service, bringing the sector in line with other forms of regulated credit.
The changes are part of a broader reform of the 1970s-era Consumer Credit Act, which the government says will be replaced with a modern, pro-growth framework overseen by the Financial Conduct Authority (FCA).
The shift aims to reduce red tape for businesses while ensuring consumers are better protected.
Use of BNPL has risen sharply in recent years, with an estimated 2 million additional users since 2022.
While the products are widely used for spreading the cost of purchases, critics have raised concerns about the lack of regulation, hidden terms, and the risk of shoppers building up unsustainable debt.
The new rules will ensure all BNPL firms operate under consistent standards, allowing consumers to know exactly what they are signing up for and whether they can afford it.
The government has confirmed that legislation to bring BNPL into regulation will be laid in Parliament today (19 May), alongside its response to the public consultation launched in October 2024.
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