AUS
NZ
UK
CA
USA
IND
Highlights:
- Regulatory Oversight: UK BNPL firms will come under FCA regulation, with new rules requiring creditworthiness checks.
- Consumer Protections: Disputes with BNPL providers will be escalated to the Financial Ombudsman Service.
- Industry Concerns: BNPL services have faced criticism for encouraging vulnerable customers to accumulate unsustainable debt levels.
The UK government is set to introduce regulations bringing buy-now-pay-later (BNPL) companies such as Klarna and Clearpay under the control of the Financial Conduct Authority (FCA). These new rules aim to enhance consumer protection by mandating that BNPL firms assess borrowers' creditworthiness and ensure that loans are genuinely affordable. In addition, consumers will be able to escalate disputes with BNPL providers to the Financial Ombudsman Service.
Under the forthcoming regulations, BNPL companies will be required to carry out more stringent checks to ensure customers can afford the services they offer. While Klarna received FCA authorisation last year for its credit and payment services, its BNPL products remain outside of this regulatory framework. The new rules are expected to close this gap and bring the entire BNPL sector in line with other financial services.
Critics have argued that BNPL services encourage excessive borrowing, especially among vulnerable customers who may take on unsustainable levels of debt. These concerns led to further scrutiny of the industry, especially after Apple discontinued its 'Apple Pay Later' BNPL product earlier this year, less than 12 months after its launch.
According to reports, the new BNPL regulations are scheduled to come into effect in early 2026, signalling a significant shift in how these services are governed in the UK.
