FCA Sees Tests Ahead as Pay Later Law Goes Into Effect

Starting next month, new pay later protections go into effect for British consumers.

However, companies shouldn’t focus solely on the onset of those regulations, Alison Walters, director of consumer finance for the U.K.’s Financial Conduct Authority (FCA), said in a speech Thursday (June 25) at the Credit Week: Powering the Future of Finance event.

“The real test is what happens beyond that point,” she said of the new buy now, pay later regulation. “We want firms to ensure that consumers receive the right information, at the right time, to make informed decisions.”

The new regulations are set to go into effect July 15, designed to bring the pay later system into a more formal supervisory structure. Among the new rules is a requirement for lenders to conduct checks for creditworthiness and affordability before offering BNPL loans.

“We are mindful that there could be some consumers who have been regularly using BNPL who find it harder to access once there are affordability checks in place,” Walters said.

“However, we think it’s important that people aren’t building up unsustainable levels of debt. And if a consumer does get into financial difficulty, under our rules, BNPL providers will be expected to provide them with support, including signposting to free debt advice.”

Writing about the new BNPL regulations earlier this month, PYMNTS noted that their timing “is significant because consumer payment behavior has become multifaceted, and providers are responding in kind.”

For example, Visa last month launched a U.K. partnership with Zilch and Thredd to support the Visa Flexible Credential, which lets multiple funding sources sit behind a sole credential while allowing consumers to decide how they want to pay at the point of purchase.

“The development reflects a broader trend,” PYMNTS added. “Consumers increasingly choose payment methods according to the circumstances of a particular transaction rather than relying on a single preferred product. Installments, debit, credit and other payment options are becoming interchangeable tools used for different purposes.”

Meanwhile, recent PYMNTS Intelligence research examined the way financial stress changes how consumers use BNPL. For financially stable households, BNPL is often seen as a source of convenience and rapid approval at checkout. But for people dealing with tighter budgets, pay later offerings serve a broader purpose by helping these consumers cover short-term liquidity needs and manage cash flow.

“That does not necessarily indicate distress,” PYMNTS wrote. “Rather, it reflects a practical response to an environment where income growth and inflation continue to move in close proximity.”