From Wednesday, BNPL lenders must be authorised by the Financial Conduct Authority (FCA) to operate in the UK, aligning these services with traditional credit providers and expanding consumer protections. The change means shoppers will have stronger rights to refunds through the Financial Ombudsman Service (FOS) for unresolved complaints and access to independent rulings when things go wrong. Major players such as Klarna and Clearpay have built sizable businesses offering interest-free instalments, but campaigners have long argued the sector has operated with limited oversight.
Regulators say new affordability checks on each BNPL transaction will help ensure borrowings are within a consumer’s means, with purchases potentially blocked if a borrower cannot demonstrate repayment capacity. Lenders are required to give clear information up front about the loan, including the consequences of missed payments, and to point customers toward free debt advice if needed.
Under the reforms, only FCA-authorised lenders will be able to offer BNPL services. Consumers can refer unresolved BNPL complaints to the FOS, which is expected to handle around 2,000 cases by the end of March. In addition, consumers can seek refunds or compensation for items costing more than £100 when a BNPL purchase falls under a section 75 claim, a remedy already available with some credit card purchases.
Industry groups point to expected growth in trust as regulation formalises existing practices. Klarna, the UK’s largest BNPL provider, argued that the rules largely formalise what it already does—conducting affordability checks, disclosing costs upfront, and reporting to credit reference agencies.
However, debt charities and consumer groups caution that stricter affordability checks could block some purchases, potentially driving certain consumers toward higher-cost or less regulated credit options. Kate Pender, chief executive of Fair4All Finance, noted that affordability tests may prevent some borrowers from accessing essentials they need, with an estimated portion of BNPL users failing conservative checks.
Support for regulation has grown among consumer advocates, who say the changes improve protection after years of debate. Money Wellness, a debt-advice service, said borrowers are increasingly spreading smaller purchases across multiple BNPL plans rather than using BNPL for high-value items. External relations manager Matthew Sheeran warned that multi-plan reliance can mask overall indebtedness.
Personal experiences illustrate the risks. One borrower described a cascade of borrowing from loans, credit cards, and BNPL, with total debt reaching about £24,000 after a period of disrupted employment and mounting expenses. He stressed that advertising and the immediacy of online shopping can be seductive, but responsibility lies with the borrower, and many consumers could benefit from reviewing their overall debt burden.
Debt-advisory groups continue to urge consumers to treat BNPL like any other form of borrowing and to consider the affordability of ongoing use. Some retailers’ in-house BNPL products may fall outside the new regulatory net, adding a layer of complexity for consumers and merchants alike.
Experian data cited in industry sources show BNPL activity remains high, with more than 100 million BNPL transactions in 2025 from around 8.5 million customers, totaling over £7 billion in spending. The vast majority of balances were repaid on time. Providers have largely supported regulation, arguing that robust rules protect consumers while enabling responsible innovation.
Observers say the policy shift will reshape consumer credit access and risk management in the UK, balancing protection with continued access to convenient payment methods.
