Millions of shoppers will benefit from new rules aimed at protecting users of Buy-Now, Pay-Later (BNPL) services. These services, which allow consumers to spread the cost of purchases, have surged in popularity but currently lack many of the protections found in traditional credit products.
In response, the UK Government has launched a consultation to bring BNPL companies under the Financial Conduct Authority (FCA). The proposed regulations will require BNPL providers to check loan affordability before offering them to consumers, aiming to prevent unmanageable debt. Companies must also provide clear, simple information about loan agreements to help consumers make informed decisions.
Another key change is applying Section 75 of the Consumer Credit Act to BNPL purchases, giving shoppers stronger rights and the ability to complain to the Financial Ombudsman. Section 75 also allows consumers to claim refunds from lenders for faulty goods or contract breaches.
The consultation closes on 29 November 2024, with legislation expected in early 2025, but regulations won’t take effect until 2026. This delay has raised concerns among consumer groups, who urge shoppers to remain cautious to avoid unaffordable debt.
The BNPL market has grown rapidly, with retailers partnering with lenders like Klarna and Clearpay. Despite no interest charges, critics warn that consumers can easily accumulate debt, prompting calls for tighter regulation.
Monzo’s integration of Apple Pay Monthly Payments signals the future direction of Buy Now, Pay Later (BNPL) services, making them even more seamlessly accessible for consumers. As BNPL becomes more embedded into everyday payment systems like Apple Pay, it paves the way for a more widespread use of deferred payments. While this may offer convenience, it also raises concerns for those already facing financial challenges, as the ease of access to credit can lead to increased debt. This shift reflects the growing normalisation of BNPL as a standard payment option, further blurring the line between affordability and long-term financial strain.
Matt Dronfield, Managing Director of Debt Free Advice, said
“At Debt Free Advice, we’ve seen a 27% rise in Buy Now, Pay Later (BNPL) debt over the past year. What’s particularly worrying is that 75% of clients with these debts are female, 57% come from non-white ethnic backgrounds and 75% have some form of health issue. This increase highlights the growing financial strain on the most vulnerable groups we support, particularly young females from non-white ethnic backgrounds.
Monzo's integration of Apple Pay Monthly Payments marks the future of BNPL services. As BNPL becomes more embedded in payment systems, its use may grow. Easier credit access could lead to more debt, reflecting the growing normalisation of BNPL schemes.While the government’s announcement is encouraging, waiting until 2026 for these rules is too long. The rise in BNPL debt shows consumers need protection now, not in two years. Delaying enforcement could put more people at risk. The FCA must prioritise earlier implementation to prevent further harm."
At Debt Free Advice, we understand the challenges of BNPL debt, and our advisors are here to help. Contact us at 0800 808 5700 or visit www.debtfreeadvice.com for support. Our lines are open 7 days a week.