The UK government is finally cracking down on the “wild west” Buy Now, Pay Later industry. New legislation introduced in May 2025 puts the Financial Conduct Authority in charge of overseeing BNPL services, affecting over 10 million UK users. The rules require providers like Klarna and Affirm to conduct proper affordability checks before lending – something they’ve managed to dodge until now. This regulatory shake-up promises major changes to how Brits shop on credit.
After years of letting Buy Now, Pay Later services run wild in the UK market, regulators are finally stepping in to tame the beast. On May 19, 2025, the UK government dropped a regulatory bombshell, introducing legislation that will bring BNPL products under the watchful eye of the Financial Conduct Authority.
It’s about time. These payment schemes have been operating in a wild west environment, free from the rules that govern other credit products. The new regulations will force BNPL providers to actually check if customers can afford their loans – imagine that! They’ll need FCA authorization too, just like grown-up financial companies. With over 10 million active BNPL users in the UK, these changes couldn’t come at a more crucial time.
The crackdown comes four years after the FCA “urgently” recommended regulation in the Woolard review. Apparently, “urgent” means different things to different people. But HM Treasury is making up for lost time, fast-tracking the timeline and aiming to have everything in place by mid-2026.
The current situation is a mess. People are racking up multiple BNPL debts across different retailers, often using these loans to make ends meet when they’re already struggling financially. The lack of consistent affordability checks hasn’t helped matters.
Under the new rules, BNPL providers will have to spell out exactly what consumers are signing up for – no more hiding behind fancy marketing and vague terms. Major industry players like Klarna, Affirm, and Afterpay have already expressed their support for these new regulations. Curiously, merchants offering BNPL won’t need credit broking authorization from the FCA. Small mercies.
BNPL firms must now show their cards – no more smoke and mirrors. At least retailers dodge the regulatory paperwork dance.
Debt charity StepChange says this regulation is “long overdue” – talk about understatement of the year. The draft legislation introduces something called ‘regulated deferred payment credit agreements,’ which is bureaucrat-speak for “we’re watching you now.”
The FCA gets 12 months to draft and finalize the rules once the statutory instrument is made. Meanwhile, the government is also tackling Consumer Credit Act reform, because apparently, they’re on a regulatory roll.
For an industry that’s been playing fast and loose with consumer credit, the party’s finally over.
