In recent times, a new type of interest-free credit known as ‘Buy now, pay later’ (BNPL) has transformed the shopping habits of many in the UK. This convenient payment option is widely available at online stores, enticing consumers to make purchases beyond their immediate financial means.
Retailers embrace BNPL as it encourages customers to make purchases they might otherwise postpone due to budget constraints. However, critics argue that BNPL can lead individuals into unnecessary debt by facilitating impulsive buying behavior.
The Financial Conduct Authority (FCA) has announced that BNPL will be fully regulated starting from July 15, 2026, in response to growing concerns about its potential risks. The FCA will introduce new regulations to address issues such as irresponsible lending practices.
BNPL operates by providing consumers with short-term loans, allowing them to make purchases without paying the full amount upfront. Retailers actively promote BNPL credit, offering various options including limited instalments, try-before-you-buy schemes, and credit agreements with interest.
While BNPL has gained immense popularity with around 11 million users last year, concerns arise regarding individuals accumulating significant debts through unregulated BNPL loans. The FCA aims to enforce stricter affordability checks to prevent consumers from overextending themselves financially and accumulating excessive debt.
By implementing these new regulations, the FCA estimates that consumers could collectively save £1.8 billion over the next decade, provided they do not resort to borrowing from alternative sources.
