Financial Conduct Authority Begins Regulating UK Buy Now Pay Later Sector

The Financial Conduct Authority began regulating the buy now pay later (BNPL) sector on July 15, 2026, introducing new legal protections for consumers in the United Kingdom. The rules require lenders to conduct proportionate affordability checks, provide clear upfront details on payment schedules and missed payments, and offer support to customers in financial difficulty. Under the new framework, BNPL agreements may be reported to credit reference agencies, and consumers benefit from Section 75 protection for purchases between £100 and £30,000.

Consumers may now escalate disputes regarding agreements taken out on or after this date to the Financial Ombudsman Service. The regulation aims to end what the government described as the BNPL wild west in a £13 billion market that previously encouraged users to accumulate debt by treating short-term credit as non-borrowing.

Major providers including Klarna and Clearpay welcomed the move, with Klarna stating the rules largely formalize its existing internal practices. However, some warnings emerged regarding the impact of stricter checks. Kate Pender of Fair4All Finance cautioned that responsible users could be unfairly excluded, potentially driving them toward illegal moneylenders. Industry analysts suggest these compliance costs may lead to market consolidation, favoring larger firms over smaller providers.