New buy-now, pay-later guidelines will be implemented

How will you be protected?

As with other forms of credit, consumers will have more rights and better information, putting an end to the "wild west" of uncontrolled borrowing.

Today, May 19, the government announced new regulations that will strengthen and clarify the rights of over 10 million online shoppers who use buy-now, pay-later (BNPL).

If you know what you're doing and want to spread the cost of big purchases, buy-now, pay-later can make sense, but it has left some people taking on more debt than they can manage.

In order to prevent people from accruing unmanageable debt, affordability checks will be implemented the following year, and consumers will have quicker access to refunds.

The government said in a statement that the goal is to end the Wild West of unregulated borrowing by bringing BNPL into line with other forms of credit and halting unaffordable borrowing.

Starting in 2026, BNPL companies will have to adhere to uniform guidelines in practice, which entails informing customers in detail about what they're getting into when they choose to split payments when they shop online, whether they can afford it, and how to get assistance in the event that something goes wrong.

To bring BNPL in line with other credit products, this entails upfront checks to ensure borrowers can repay their debts, quicker and more equitable access to refunds, and the ability to file a complaint with the Financial Ombudsman.

Orchard Financial Advisers' managing director, Ben Perks, stated: "The simplicity and allure of buy now, pay later often become a hindrance for many people. Borrowers who receive careless lending are frequently overexposed and left with unaffordable payments.

"There is a place for buy now, pay later when there are adequate checks and balances, particularly on expensive necessities. It should not, however, be used to finance unnecessary expenditures.

Since 2022, BNPL has expanded quickly, adding two million new users.

Increased consumer confidence is the government's goal, "while giving firms the certainty they need to innovate, grow, and invest."

"Buy-now, pay-later has changed shopping for millions of people, but it has been a Wild West for too long, leaving consumers vulnerable," said Emma Reynolds, Treasury's economic secretary.

The announcement is supported by new changes to the Consumer Credit Act, which the government claims will create a "modern, pro-growth framework that reflects how people borrow today" in place of the outdated system that has existed for 50 years.

The Financial Conduct Authority will assume supervision in place of the outmoded and unclear regulations.

The action will strengthen consumer protections and remove needless burdens on businesses, the government said.