Customers using buy now, pay later services will receive clearer information and must undergo appropriate affordability checks under stronger protections set to come into force from July, according to the City regulator.

The sector will fall under the regulation of the Financial Conduct Authority (FCA) from July 15, 2026, and lenders will need to secure authorisation from the regulator to offer BNPL products. BNPL firms will also be subject to the Consumer Duty, which is overseen by the FCA. This duty requires financial firms to prioritise customers, including customer interactions and product design.

BNPL options often appear at online checkouts, allowing individuals to spread the cost of purchases, which could potentially make payments more manageable for some.

However, these products have sparked controversy, with worries that some individuals could be overextending themselves financially and exacerbating borrowing issues.

The FCA said that under its supervision, consumers should receive clear, upfront details about their agreement, including payment due dates, amounts, and the consequences of missing a payment.

Lenders are also required to conduct proportionate checks to ensure customers can afford to repay what they borrow before offering BNPL.

BNPL firms will need to provide support to customers facing financial difficulties, and, where suitable, direct them towards free debt advice.

If something goes awry, consumers can also lodge a complaint with the Financial Ombudsman Service (FOS).

The regulator said that its balanced approach will ensure BNPL can be accessed by individuals if lending is sustainable and will also stimulate firms to innovate and compete effectively in the interests of consumers.

Sarah Pritchard, deputy chief executive at the FCA, said: “We want the buy now, pay later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they’re unable to repay because that could worsen their financial situation. Now Parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.”

The BNPL market has seen significant growth in recent years, reaching over £13 billion in 2024, according to the FCA.

Based on its 2024 Financial Lives Survey, 20% of UK consumers, equating to 10.9 million adults, used BNPL in the 12 months leading up to May 2024.

Individuals struggling with their finances can seek advice on managing debt on the Government-backed MoneyHelper website.

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Firms will have the opportunity to register for the temporary permissions regime between May 15, 2026 and July 1, 2026. Firms will then have six months from the date the regime comes into effect to apply for full authorisation.

Peter Tutton, director of policy, research and public affairs at StepChange Debt Charity, said: “Buy now, pay later can be a helpful way for people to spread costs. But like any form of credit, it carries risks when repayments become difficult. The absence of FCA regulation until now has only heightened the risk of financial harm for those relying on BNPL.

“Going forward, people using BNPL products will be protected by affordability checks, consistent support from lenders and access to the Financial Ombudsman if things go wrong – these are all essential safeguards for borrowers using any type of credit.

“We would urge anyone using BNPL to always double check that the repayments will be affordable, and if you are struggling to repay, free and impartial debt advice is available from charities like StepChange.”

Rocio Concha, Which? Director of Policy and Advocacy, said: “Buy now, pay later has become a popular payment method for many consumers – especially for those managing tighter budgets. However, because it has so far been unregulated, consumers paying this way haven’t been made sufficiently aware of the risks attached with this form of credit, such as the late fees which may apply and the potential of getting into debt.

“Which? has campaigned for years for BNPL to be regulated and clearer information, proper affordability checks and access to redress when things go wrong should give shoppers proper protections should they choose this payment method.”

Vix Leyton, a consumer expert at banking app thinkmoney, said: “Bringing BNPL under regulation is absolutely the right move because it puts essential guardrails around a product millions rely on.”

Anne Pardoe, head of policy at Citizens Advice, said: “These protections couldn’t come soon enough. The growing BNPL market is driving more people to our services each year, with many struggling to repay credit they can’t afford or falling behind on essential bills.”

A spokesperson at BNPL provider Clearpay said: “We welcome regulation, which will establish a consistent operating environment and clear compliance standards for all providers.”

A Klarna spokesperson said: “These new rules will raise standards across the market.”

A spokesperson for banking and finance body UK Finance said: “It’s right that the product is regulated and our members welcome the application of more flexible regulation through the FCA.”