What Do The New 'Buy Now, Pay Later' Rules Actually Mean For You?

!function(n){if(!window.cnx){window.cnx={},window.cnx.cmd=[];var t=n.createElement('iframe');t.display='none',t.onload=function(){var n=t.contentWindow.document,c=n.createElement('script');c.src='//cd.connatix.com/connatix.player.js',c.setAttribute('async','1'),c.setAttribute('type','text/javascript'),n.body.appendChild(c)},n.head.appendChild(t)}}(document);(new Image()).src = 'https://capi.connatix.com/tr/si?token=8b034f64-513c-4987-b16f-42d6008f7feb';cnx.cmd.push(function(){cnx({"playerId":"8b034f64-513c-4987-b16f-42d6008f7feb","mediaId":"150e8cef-1a09-40bd-a8f5-f53040cbd428"}).render("6a574790e4b0d0cec7ce2c7a");}); New “buy now, pay later” (BNPL) regulations have come into effect, changing how deferred payment credit (DFC) companies, like Klarna and Clearpay, can operate in the UK. The new regulations are set by the Financial Conduct Authority (FCA) and are designed to “reduce the risks of harm to consumers”. They’re not meant to outright ban BNPL loans. Instead, the FCA said that these deferred payment credit (DFC) systems will be able to “continue to innovate and grow sustainably, and that consumers can still access DPC where appropriate”. So why are these changes happening, and what does that actually mean for consumers? What is a BNPL company, and why does it need regulation? If you’ve ever shopped online, you’ll probably have had an option to spread your payments across a set period (like six months) rather than paying the full amount in one go. Those who pay these installments in full effectively get an interest-free loan for their purchase. But people who can’t or don’t cough up can face late payment fees and even, sometimes, have their credit score affected. And this type of lending has grown from “£0.06bn in 2017 to over £13bn in 2024”, the FCA said. Until very recently, it was unregulated, despite having a multi-billion-pound consumer credit market. The new rules have come in place “following concerns that borrowers were not getting sufficient information about DPC agreements and some lending being unaffordable,” the FCA added. Regulators also think unchecked BNPL contracts mean customers might end up taking on more debt than they’re able to repay, thereby ending up with lots of late fees. What do the new buy now, pay later rules mean for me? BNPL companies will have to give you consistent and clear information about what you’ll need to pay and when, as well as what’ll happen if you can’t make payments. They need to tell you right away if you miss a repayment, so a late fee can’t sneak up on you. They must carry out affordability checks before lending someone money (though many companies say they already do this, now they will all have to). This is designed to make it harder to charge what a person doesn’t seem likely to afford. These “proportional” checks will apply to loans under £50 too, but there’s some flexibility with how companies run these. The BNPL company will now be jointly responsible with the retailer if something goes wrong on a purchase that costs from £100-£30,000, including if something you buy is faulty. These are section 75 protections, which apply to credit cards too. If you have an issue with your BNPL service, you’ll be able to take it up with the Financial Ombudsman. Consumers will have to be redirected to debt support services rather than debt collection agencies if they fall into financial difficulties. Some, like Kate Pender, the chief executive of not-for-profit Fair4All Finance, have shared concerns about the new rules, though. “While regulation is clearly needed and welcomed, our recent research found that nearly half of those likely to be rejected have not missed a BNPL payment,” she said. “The need for credit doesn’t just disappear when you can’t access it,” the expert shared, adding that people are often pushed towards more expensive or unregulated alternatives like high-interest “loan sharks”. Related... The EU Just Approved New Rules For Air Travel: 13 Changes To Expect Ryanair Mulls Changing Baggage Rules In Major Update The 7cm Grass Rule Firefighters Say May Help Fireproof Your Garden

New “buy now, pay later” (BNPL) regulations have come into effect, changing how deferred payment credit (DFC) companies, like Klarna and Clearpay, can operate in the UK. The new regulations are set by the Financial Conduct Authority (FCA) and are designed to “reduce the risks of harm to consumers”. They’re not meant to outright ban BNPL loans. Instead, the FCA said that these deferred payment credit (DFC) systems will be able to “continue to innovate and grow sustainably, and that consumers can still access DPC where appropriate”. So why are these changes happening, and what does that actually mean for consumers? What is a BNPL company, and why does it need regulation? If you’ve ever shopped online, you’ll probably have had an option to spread your payments across a set period (like six months) rather than paying the full amount in one go. Those who pay these installments in full effectively get an interest-free loan for their purchase. But people who can’t or don’t cough up can face late payment fees and even, sometimes, have their credit score affected. And this type of lending has grown from “£0.06bn in 2017 to over £13bn in 2024”, the FCA said. Until very recently, it was unregulated, despite having a multi-billion-pound consumer credit market. The new rules have come in place “following concerns that borrowers were not getting sufficient information about DPC agreements and some lending being unaffordable,” the FCA added. Regulators also think unchecked BNPL contracts mean customers might end up taking on more debt than they’re able to repay, thereby ending up with lots of late fees. What do the new buy now, pay later rules mean for me? BNPL companies will have to give you consistent and clear information about what you’ll need to pay and when, as well as what’ll happen if you can’t make payments. They need to tell you right away if you miss a repayment, so a late fee can’t sneak up on you. They must carry out affordability checks before lending someone money (though many companies say they already do this, now they will all have to). This is designed to make it harder to charge what a person doesn’t seem likely to afford. These “proportional” checks will apply to loans under £50 too, but there’s some flexibility with how companies run these. The BNPL company will now be jointly responsible with the retailer if something goes wrong on a purchase that costs from £100-£30,000, including if something you buy is faulty. These are section 75 protections, which apply to credit cards too. If you have an issue with your BNPL service, you’ll be able to take it up with the Financial Ombudsman. Consumers will have to be redirected to debt support services rather than debt collection agencies if they fall into financial difficulties. Some, like Kate Pender, the chief executive of not-for-profit Fair4All Finance, have shared concerns about the new rules, though. “While regulation is clearly needed and welcomed, our recent research found that nearly half of those likely to be rejected have not missed a BNPL payment,” she said. “The need for credit doesn’t just disappear when you can’t access it,” the expert shared, adding that people are often pushed towards more expensive or unregulated alternatives like high-interest “loan sharks”. Related... The EU Just Approved New Rules For Air Travel: 13 Changes To Expect Ryanair Mulls Changing Baggage Rules In Major Update The 7cm Grass Rule Firefighters Say May Help Fireproof Your Garden