Starting July, buy now, pay later customers will face affordability assessments and receive support in case of issues under new, stricter regulations. The sector will fall under the oversight of the Financial Conduct Authority (FCA) from July 15, 2026. Users of buy now, pay later services must be provided with transparent information upfront, detailing payment schedules, amounts due, and consequences of missed payments.
Lenders offering buy now, pay later options are mandated to conduct checks to ensure borrowers can afford repayments. Additionally, they must offer assistance to customers facing financial challenges, including guiding them to free debt advice services.
Customers utilizing buy now, pay later services will have the right to escalate complaints to the Financial Ombudsman Service (FOS) if they feel unfairly treated. Lenders will need authorization from the regulator and will be subject to Consumer Duty rules, enhancing consumer protection standards in the UK financial sector.
The buy now, pay later market reached £13 billion in 2024, with 10.9 million adults utilizing such services in the preceding 12 months. Sarah Pritchard, the FCA’s deputy chief executive, emphasized the importance of responsible lending practices to prevent exacerbating individuals’ financial difficulties.
Peter Tutton, director at StepChange Debt Charity, highlighted the benefits of buy now, pay later while cautioning against the risks associated with credit. He emphasized the necessity of regulatory safeguards, including affordability checks and lender support, to protect borrowers.
In conclusion, the updated regulations aim to ensure that the 11 million buy now, pay later users are shielded by adequate consumer protections and responsible lending practices. Customers are advised to verify the affordability of repayments and seek assistance from organizations like StepChange in case of financial challenges.