Millions of shoppers will gain stronger rights and clearer information ending the ‘wild west’ of unregulated Buy-Now, Pay-Later borrowing.
It follows the popularity of payment platforms such as Klarna, PayPal Pay in 3, Clearpay, Payl8er, Laybuy, DivideBuy, Zilch and Amazon Pay Over Time.
New rules include affordability checks to stop people racking up unaffordable debt, and faster access to refunds.
From next year, BNPL firms will need to follow consistent standards — so shoppers will know exactly what they’re signing up to when they opt to break up payments, whether they can afford it, and how to get help when things go wrong.
That means upfront checks to make sure people can repay what they borrow, fairer and faster access to refunds, and the right to complain to the Financial Ombudsman — bringing BNPL in line with other credit products.
Emma Reynolds, Economic Secretary to the Treasury, says: "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."
Martin Lewis has tweeted a response to the changes, saying: “We’re finally sneaking closer to the long overdue, much needed, consumer protection that regulation of BNPL will bring.
"Buy Now, Pay Later is now ubiquitous at online checkouts, many people don’t realise it is a form of debt – and that if things go wrong it can mess up their financial lives.
"This isn’t about knocking BNPL, its about making it safer. BNPL can be useful, allowing those who need to spread payments for a budgeted, necessary purchase like a plumber to do it interest-free. Yet it's been sold as a lifestyle choice, not a debt, and pushed for instinct buys or even takeaways. Too many are in trouble with multiple BNPL repayments, leading to debt-chasing and credit file damage."
Good new. The Statutory Instrument for regulating the Buy Now Pay Later sector should be laid today (ie the start of putting it in law). Then there'll be a consultation by the regulator. Here's my official statment...
— Martin Lewis (@MartinSLewis) May 19, 2025
“We’re finally sneaking closer to the long overdue, much…
Many firms are welcoming the changes, including Saqhib Ali, CEO at ZeroPA, who says: "As a BNPL provider, we welcome consumer protection. Many unscrupulous providers promote BNPL with 3-6 instalments interest free then levy fees, charges and penalties. The young are drawn into incurring many thousands of pounds in BNPL purchases on wants rather than needs.
"Without credit checks, income and expenditure review or appraisal of existing arrears, the position for many is daunting. It can lead to stress, anxiety and mental health deterioration. As CEO of ZeroPA we charge no interest, fees or charges and offer up to 12 instalments on charity shop purchases of £50-£150 towards furniture, clothing, small electricals and white goods."
The moves are also being broadly welcomed by financial experts across the industry.
Ben Perks, managing director at Orchard Financial Advisers says: "About time. Many people succumb to the ease and appeal of Buy Now, Pay Later, but it often turns into a thorn in their side. The lack of responsible lending often sees borrowers over exposed and stuck with unaffordable payments.
"With proper checks and balances, there is a place for buy now, pay later, especially on high value essential items. But it shouldn’t be a means to fund frivolous spending."
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Tony Redondo, founder at Cosmos Currency Exchange says: "The 11 million consumers may cheer the new BNPL (Buy Now, Pay Later) rules, gaining affordability checks, section 75 refunds and FOS access to curb debt. This is vital amid an economic climate with inflation set to rise to 3.7%, rising unemployment and meagre economic growth of 0.75% but the 2026 delay risks festive overspending.
"BNPL firms like Klarna brace for compliance costs. Retailers may well fear sales dips with Klarna’s 22,000 partners already feeling the squeeze.
"The FCA aims to tame the 'wild west,' yet over-regulation might choke fintech innovation, leaving low-income users reliant on fewer choices and costlier loans. Meanwhile, systemic issues like housing unaffordability fuel BNPL reliance, urging broader reforms.
"Balancing consumer safety with market vitality remains the challenge."
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