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New regulations are now in place to strengthen consumer protections when using Buy Now Pay Later (BNPL) services, though some shoppers may face loan refusals under the updated system. Starting Wednesday, BNPL providers must obtain official approval from regulators before operating, which means customers will have improved chances to claim refunds and resolve disputes through independent bodies if problems arise.
Popular BNPL companies like Klarna and Clearpay have grown rapidly by offering interest-free instalment plans, but advocacy groups have frequently criticized the sector for its lack of oversight. Despite the positive steps towards regulation, concerns have emerged that the introduction of mandatory affordability checks for every BNPL purchase could result in some customers being denied access to credit for the first time. This might push vulnerable borrowers toward more hazardous lending options, such as unscrupulous loan sharks.
Kate Pender, chief executive of the nonprofit Fair4All Finance, emphasized the risks associated with these new restrictions: “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 cautioned, “The need for credit doesn’t just disappear when you can’t access it and people are often pushed towards more expensive or unregulated alternatives.”
The experience of individuals like Tim Riesner illustrates the potential dangers of BNPL borrowing without careful management. Riesner described how initially viewing BNPL as a convenient payment option led him to accumulate debts from multiple credit sources, ultimately totaling £24,000. After health issues forced him to leave a well-paying construction job, he struggled to cope financially but eventually found help through the charity Business Debtline. Debt adviser Jack Sporcic from National Debtline echoed the need for caution: “We are urging consumers to treat Buy Now Pay Later in exactly the same way as any other form of borrowing,” pointing out the trend of BNPL being used for essentials like food and energy bills.
Data from credit agency Experian highlights the scale of BNPL usage, estimating that in 2025 over 100 million BNPL purchases were made by some 8.5 million customers, amounting to more than £7 billion spent. The agency noted that 98.5% of balances were paid on time. BNPL providers themselves have been mostly supportive of the new regulations, though they stress the importance of maintaining room for innovation. A Klarna representative commented, “The FCA’s rules largely formalise what we already do – we run affordability checks, show costs upfront and report to credit reference agencies.” The spokesperson added, “Interest-free buy now pay later is a simpler, fairer, lower-cost alternative to revolving credit. Robust regulation that gives consumers added confidence and strengthens their access to protections is a good thing.
Read the full article from The BBC here: Read More
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