UK tightens rules on buy-now-pay-later services

New rules for Buy Now, Pay Later services took effect in the UK this week, bringing the sector under the same regulatory umbrella as traditional credit products. The changes introduce mandatory affordability checks, clearer disclosures, and access to formal complaints procedures to match the growing use of interest-free payment plans.

Clearpay, one of the UK’s largest BNPL providers, has been preparing for the transition. CEO Rich Bayer stated the new framework will standardize safeguards already in place at many providers, including late-fee caps and account pauses after missed payments. From July 15, customers will gain Section 75 protection for qualifying purchases and the right to escalate disputes to the Financial Ombudsman Service.

Bayer described the rules as beneficial for the sector. He noted that consumers consistently say they value regulation because it provides greater protection and confidence. A survey found 77% of consumers support the changes, while 48% said the ability to complain to an independent body would make them more likely to use these services.

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The shift occurs as BNPL moves from a niche option to a standard payment method. Nearly 40% of UK consumers have used it, with a quarter preferring it over credit cards or loans for cost savings. This adoption reflects broader trends in digital payments, where flexibility at checkout is now expected.

The UK’s approach to BNPL regulation has attracted interest as a possible model for other fintech sectors. Bayer called it a collaboration between government, regulators, and industry, with providers sharing data on customer behavior and consumer groups addressing the needs of vulnerable users. He said the result is a balanced framework that supports innovation while ensuring protection.

The changes come as the UK reviews its 50-year-old Consumer Credit Act, with BNPL’s regulatory evolution cited as an example of modernizing outdated rules. Bayer suggested an outcomes-focused approach could encourage responsible innovation while maintaining high standards.

Skepticism remains, however. Critics have argued that BNPL encourages overspending, though Bayer disputed this. He said the data does not support that claim, adding that people use these services to manage money, not to take on unaffordable debt.

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The new rules will put that claim to the test. Affordability checks, though less strict than those for credit cards, will require providers to verify a customer’s ability to repay before approving transactions. How strictly these checks are applied—and how consumers react—will shape the sector’s future.

Bayer believes the regulation will strengthen trust in BNPL, positioning it as a lasting part of the UK’s financial system. The challenge will be whether that trust leads to continued growth or if increased scrutiny slows adoption.

The era of BNPL operating without clear oversight has ended. The impact of these rules will determine whether the sector stabilizes or forces providers to adjust their models.