The BNPL sector comes under the control of the Financial Conduct Authority (FCA) July 15, and the regulator confirmed its new safeguards for consumers in a Tuesday (Feb. 10) press release emailed to PYMNTS.
“We want the buy now, pay later sector to thrive,” FCA Deputy Chief Executive Sarah Pritchard said in the release. “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.”
Under the new guidelines, lenders must be authorized by the FCA to offer BNPL loans. They are also required to conduct checks to ensure customers can afford to repay their loans before offering BNPL as an option and provide support to customers facing financial hardship.
The rules are also designed to give consumers clear information about their BNPL agreements, as well as the ability to complain to the Financial Ombudsman Service if something goes awry.
In a statement to PYMNTS, Damien Burke, head of regulatory practice at independent banking and credit risk advisory firm Broadstone, said the FCA’s “regulatory reset” is important in making sure borrowers understand the risks and the repayment obligations involved in BNPL. The challenge for the industry will be in implementation.
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“Lenders will need to adapt systems, data and underwriting processes quickly, while maintaining the frictionless customer journeys that have driven BNPL’s popularity,” Burke said. “The temporary permissions regime should help smooth this transition, but firms that are not already operating to FCA standards may find the authorization process demanding.”
Meanwhile, Greg B. Davies, head of behavioral finance at Oxford Risk, cautioned that BNPL rules should take into account the “psychology of spending.”
“Affordability checks based purely on patchy credit histories are necessary but reactive,” he said. “Behavioral signals such as repeat usage, stacking across providers or escalating short-term commitments can indicate vulnerability earlier than traditional credit data.”
“The right goal is proportionate protection,” he added. “Preserve flexibility for those using the product responsibly, while introducing clearer visibility and friction where patterns suggest mounting risk. That is how you protect consumers without killing innovation.”
Alexander Berrai, deputy CEO at emerchantpay, said the FCA’s decision is a “necessary step” amid the increasing popularity of BNPL.
“Proportionate affordability checks and clearer consumer information should help ensure BNPL is used responsibly and that consumers are not taking on credit they cannot reasonably repay,” Berrai said.
The new rules are arriving as BNPL shifts from its origins as a “checkout convenience for sneakers and sofas” to a tool for paying for everything from groceries to utility bills to subscription renewals, PYMNTS reported Monday (Feb. 9). It’s a shift that carries financial consequences for consumers.
“Users who apply BNPL to essential or recurring expenses are more likely to pay interest than those who confine it to discretionary categories, reflecting both the frequency of these transactions and their role in managing cash flow between paychecks,” PYMNTS reported. “For many households, paying over time has become less about indulgence and more about maintaining day-to-day stability.”
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