New Rules Offer Boost for Millions Who Use Buy Now Pay Later Features
Millions of shoppers are set to gain stronger rights and clearer information as regulatory changes aim to end the ‘wild west’ of unregulated Buy Now Pay Later (BNPL) borrowing. These changes come on the heels of the growing popularity of payment platforms such as Klarna, PayPal Pay in 3, Clearpay, Payl8er, Laybuy, DivideBuy, Zilch, and Amazon Pay Over Time.
The new regulations will introduce affordability checks to prevent consumers from accumulating unaffordable debt and provide faster access to refunds. From next year, BNPL companies will be required to adhere to consistent standards, giving consumers a clear understanding of the terms when they choose to spread payments. This includes ensuring that customers can afford the payments and providing assistance when issues arise.
This regulatory shift means implementing upfront checks to verify a shopper’s ability to repay borrowed amounts, alongside fairer and more rapid refund processes. Consumers will also gain the right to escalate complaints to the Financial Ombudsman, aligning BNPL with other credit products.
Emma Reynolds, Economic Secretary to the Treasury, commented, “Buy Now, Pay Later has transformed shopping for millions, but for too long it has operated as a wild west, leaving consumers exposed. These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs.”
Financial commentator Martin Lewis noted, “We’re finally sneaking closer to the much-needed consumer protection that BNPL regulation will bring. While BNPL offers utility by allowing people to spread payments for necessary purchases interest-free, it has often been marketed as a lifestyle choice rather than a form of debt. This has led to consumers getting into trouble with multiple BNPL repayments. These changes are about making BNPL safer and more transparent for everyone.”
Many firms in the industry have welcomed these changes. Saqhib Ali, CEO of ZeroPA, stated, “As a BNPL provider, we welcome consumer protection. There are providers who promote interest-free instalments only to impose fees and penalties later. Such practices draw young consumers into taking on significant BNPL purchases. Without proper credit checks, income and expenditure assessments, or evaluation of existing debts, this can be daunting and lead to stress and anxiety.”
The move has gained broad support from financial experts across the industry. Ben Perks, managing director at Orchard Financial Advisers, mentioned, “It’s about time. Many succumb to the appeal of BNPL, but often end up overexposed with unaffordable payments. With the proper checks and balances, BNPL can be beneficial, especially for high-value essential items. However, it should not encourage unnecessary spending.”
Tony Redondo, founder at Cosmos Currency Exchange, shared his thoughts, “The introduction of BNPL rules offers essential protections in a challenging economic climate. While firms like Klarna prepare for compliance costs, the potential impact on sales and innovation remains a concern. Yet, balancing consumer safety with maintaining a vibrant market is crucial.”
In conclusion, the upcoming BNPL regulations represent a significant step towards safeguarding consumers and bringing clarity to financial transactions. As the financial landscape evolves, these measures aim to secure users from debt traps while allowing the sector room to innovate responsibly.
