Consumers utilizing buy now, pay later services will soon be subject to enhanced protections starting in July. The sector will fall under the regulation of the Financial Conduct Authority (FCA) from July 15, 2026. Following this transition, individuals utilizing buy now, pay later options must receive transparent information upfront regarding their payment terms, including due dates, amounts, and consequences of missed payments.
Furthermore, buy now, pay later lenders will be required to conduct affordability assessments to ensure customers have the means to repay their borrowings. Support services will also be mandated to assist customers facing financial challenges, directing them to free debt advice resources.
Users of buy now, pay later services will have the right to escalate complaints to the Financial Ombudsman Service (FOS) if they feel unfairly treated. Lenders must obtain authorization from the regulator and adhere to Consumer Duty regulations, which establish heightened consumer protection standards within the UK financial services sector.
With the buy now, pay later market expanding to £13 billion in 2024, as reported by the FCA, and with 10.9 million adults utilizing such services in the 12 months leading up to May 2024, the need for these regulatory measures is evident. Sarah Pritchard, 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 options for cost spreading but noted the associated risks, especially without prior FCA oversight. Moving forward, consumers can expect improved protections, including affordability checks, ongoing support from lenders, and access to the Financial Ombudsman in case of grievances, ensuring a safer borrowing environment for all credit users.