More than 10 million people who use buy-now, pay-later (BNPL) when they shop online will gain stronger rights and clearer protections under new rules announced by the government today (19 May).
While buy-now, pay-later can make sense if you know what you’re doing and want to spread the cost of large purchases, it has left some people borrowing more than they can afford.
Affordability checks will be introduced next year to stop people racking up unaffordable debt, and shoppers will be given faster access to refunds.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The aim is to stop unaffordable borrowing and bring BNPL into line with other types of credit, ending the ‘Wild West’ of unregulated borrowing, the government said in a statement.
From 2026, BNPL firms will need to follow consistent standards – in practice this means telling shoppers clearly exactly what they’re signing up to when they opt to break up payments when they shop online, whether they can afford it, and how to get help when things go wrong.
That means upfront checks to make sure people can repay what they borrow, fairer and faster access to refunds, and the right to complain to the Financial Ombudsman — bringing BNPL in line with other credit products.
Ben Perks, managing director at Orchard Financial Advisers, said: “Many people succumb to the ease and appeal of buy now, pay later, but it often turns into a thorn in their side. The lack of responsible lending often sees borrowers over exposed and stuck with unaffordable payments.
“With proper checks and balances, there is a place for buy now, pay later, especially on high value essential items. But it shouldn’t be a means to fund frivolous spending.”
BNPL has grown rapidly with an extra two million people using the product since 2022.
The government hopes the changes will boost consumer confidence, “while giving firms the certainty they need to innovate, grow and invest”.
Emma Reynolds, economic secretary to the Treasury, said: “Buy-now, pay-later has transformed shopping for millions, but for too long has operated as a Wild West – leaving consumers exposed.”
The announcement is backed by new reforms to the Consumer Credit Act – which will replace a 50-year-old regime with what the government said will be a “modern, pro-growth framework that reflects how people borrow today”.
Outdated and confusing rules will be removed, with oversight shifting to the Financial Conduct Authority.
The move will cut unnecessary burdens on business while strengthening protections for consumers, the government said.
