New Rules Require FCA Authorisation for Buy Now Pay Later Lenders

New rules took effect Wednesday requiring buy now pay later lenders to hold Financial Conduct Authority authorisation before offering services, BBC News reported. Shoppers can now refer unresolved complaints to the Financial Ombudsman Service, which expects about 2,000 BNPL cases by the end of March.

Consumers can also claim refunds and compensation for faulty goods over £100 directly from the BNPL provider under section 75 rules.

Each transaction must pass an instant automatic affordability test or the purchase will be blocked. Borrowers must receive clear information upfront about missed payments and be directed to free debt advice if they face difficulty. Kate Pender, chief executive of Fair4All Finance, estimated that 10% to 30% of BNPL users would fail conservative affordability checks.

Nearly half of those likely to be rejected have not missed a BNPL payment, according to the organisation's research. Experian data showed more than 100 million BNPL transactions by 8.5 million customers in 2025, worth more than £7 billion, with 98.5% of balances repaid on time.

A Klarna spokesman said the average age of its customers is 38 and that the firm already runs affordability checks, shows costs upfront and reports to credit reference agencies.

Tim Riesner accumulated £24,000 in debt after using multiple BNPL plans alongside loans and credit cards. With help from Business Debtline he obtained a Debt Relief Order and is now on track to become debt-free. Some retailers' in-house BNPL products remain outside the new FCA rules.

BNPL services have proved particularly popular with 18- to 24-year-olds.