The new buy now pay later rules set to protect shoppers

New legislation to be introduced on Monday aims to rein in the "wild west" of buy now, pay later (BNPL) products, offering greater protection for shoppers.

Concerns have grown over the lack of regulation in the sector, which has seen an estimated 10 million users potentially taking on unsustainable debt.

Economic Secretary to the Treasury, Emma Reynolds, described the current BNPL landscape as a "wild west – leaving consumers exposed."

The new rules will mandate affordability checks for borrowers before they can access BNPL services.

This measure is designed to prevent consumers from spiralling into debt. Additionally, the legislation will ensure fairer and faster access to refunds and grant consumers the right to complain to the Financial Ombudsman, bringing BNPL in line with regulations governing other credit forms.

These changes follow a Treasury consultation last year, which explored placing BNPL firms under the supervision of the Financial Conduct Authority (FCA) and applying the Consumer Credit Act to the sector.

According to Ms Reynolds, the new regulations will strike a balance between protecting shoppers from "debt traps" and providing the BNPL industry with the "certainty it needs to invest, grow and create jobs."

Citizens Advice welcomed the legislation, saying it was “a crucial step towards better protections for consumers”.

Tom MacInnes, director of policy at Citizens Advice, said: “For too long, people have been exposed to unaffordable debt from a BNPL sector that has operated in a regulatory area.

“For some time, this has had dire consequences. Many people are struggling to repay credit they can’t afford, falling behind on essential bills and often needing emergency support, like food bank vouchers.”

He added that this was “not the end of the road”, and urged the FCA to “act swiftly to set out the strong consumer safeguards that are so urgently required”.

The changes have also been welcomed by BNPL companies, with one – Clearpay – suggesting it would lead to more people using the product.

A spokesperson for the company said legislation would “create a more sustainable foundation for the future of BNPL as it continues to grow as an everyday payment option for consumers”.