New rules to protect millions of buy-now, pay-later shoppers

MILLIONS of shoppers using buy-now, pay-later (BNPL) services are set to receive stronger protections under new government proposals. The government has launched a consultation to bring BNPL providers under the oversight of the Financial Conduct Authority (FCA) and apply key parts of the Consumer Credit Act to these services.

Currently, BNPL users lack many of the protections that come with traditional credit products, leaving some vulnerable to unaffordable debt. The proposed rules will require BNPL companies to ensure that loans are affordable by assessing consumers’ ability to repay before offering credit. They will also be required to provide clear, accessible information about loan terms upfront, helping shoppers make informed decisions.

Economic secretary to the treasury, Tulip Siddiq, said the previous government left BNPL users without adequate safeguards. “We promised to take action, and now we are delivering. Our approach will give shoppers access to key protections provided by other forms of credit while supporting innovation in the sector,” she said.

The new rules also include stronger consumer rights, including applying Section 75 of the Consumer Credit Act. This will allow BNPL users to claim refunds from lenders if they encounter problems with their purchases. Additionally, customers will be able to take complaints to the Financial Ombudsman Service.

Consumer advocates have welcomed the proposed changes. Rocio Concha, director of policy and advocacy at Which?, said, “Clearer information about the risks and affordability checks will be a win for consumers.” She also emphasised the need for swift legislation to ensure BNPL users are protected like other credit consumers.

Michael Saadat of Clearpay noted that the government had evolved its regulatory framework based on industry feedback, saying, “We have always supported regulation that prioritises customer protection and innovation.”

The consultation will close on 29 November, with final legislation expected in early 2025. The FCA is expected to finalise and implement the new rules by 2026.