Starting from July, buy now, pay later customers will face affordability assessments and receive support in case of issues under enhanced safeguards. The sector will fall under the Financial Conduct Authority (FCA) oversight from July 15, 2026. Users of buy now, pay later services will be mandated to receive transparent information upfront regarding their agreements, including payment schedules, amounts due, and consequences of missed payments.
Additionally, buy now, pay later lenders must conduct evaluations to ensure borrowers can afford repayments. Assistance will be provided to customers encountering financial challenges, guiding them to free debt advisory services. Users can also escalate complaints to the Financial Ombudsman Service (FOS) if they feel unfairly treated.
Furthermore, firms must seek authorization from the regulator and adhere to Consumer Duty regulations, which elevate consumer protection standards in the UK financial sector. Companies have a six-month window from the enforcement date to apply for full authorization.
Despite enabling people to spread purchase costs, the buy now, pay later industry has faced criticism for potentially leading individuals into unmanageable debt. According to the FCA, the market reached £13 billion in 2024, with 10.9 million adults utilizing buy now, pay later services in the previous 12 months.
Sarah Pritchard, the FCA’s deputy chief executive, emphasized the importance of responsible lending to prevent worsening financial situations. She highlighted the regulatory actions as crucial safeguards for the 11 million users of such services.
Peter Tutton, director of policy, research, and public affairs at StepChange Debt Charity, acknowledged the benefits of buy now, pay later but stressed the importance of careful repayment planning. He welcomed the introduction of affordability checks, consistent lender support, and access to the Financial Ombudsman for consumers facing difficulties.
In conclusion, the new regulations aim to protect buy now, pay later users by ensuring affordability checks, ongoing support, and avenues for recourse in case of financial distress. Consumers are advised to assess repayment affordability and seek assistance from organizations like StepChange in case of repayment challenges.