The UK Government has unveiled new regulations aimed at safeguarding consumers who use buy-now-pay-later (BNPL) services, seeking to address risks from unregulated borrowing and ensure greater financial protection for shoppers.
Under the new rules, BNPL lenders will be required to conduct rigorous affordability checks to prevent consumers from accumulating unsustainable debt. The legislation also guarantees enhanced access to refunds for customers and establishes a formal mechanism for filing complaints with the Financial Ombudsman. Critically, BNPL providers will now fall under the same regulatory oversight as banks, subject to supervision by the Financial Conduct Authority (FCA).
Government representatives highlighted that the regulations aim to shield consumers from debt while providing the sector with a stable framework to attract investment, drive growth, and create jobs. Concurrently, the Treasury plans to reform the Consumer Credit Act to develop a modern, pro-growth regulatory framework that balances consumer protection and industry innovation.
The initiative comes four years after the UK first announced plans to regulate BNPL, with the Treasury consulting on draft legislation in 2023 before delaying its implementation. Industry players have responded positively to the proposals: Klarna, a leading BNPL provider, noted that interest-free BNPL serves as an essential financial alternative for UK residents and expressed support for regulations that maintain service safety and accessibility. The company emphasized its willingness to collaborate with the FCA on rules that protect consumers while fostering innovation.
The BNPL sector has grown significantly in the UK in recent years, with no signs of slowing down. According to Finder, 42% of UK adults used BNPL services in 2025, up from 36% in early 2023. An additional 9% plan to use BNPL in the future, bringing the total user base to 51% of the population. The market is projected to expand from £29.85 billion in 2024 to £47.27 billion by 2029. Against this backdrop, regulators aim to establish controls that balance consumer and business security while nurturing innovation in the rapidly evolving sector.
