The proposed legislation, introduced to Parliament on May 19, 2025, seeks to overhaul the 50-year-old Consumer Credit Act to better align with modern borrowing trends. Under the new rules:
- Affordability Checks: BNPL providers will be required to conduct upfront assessments to ensure consumers can repay borrowed amounts.
- Consumer Rights: Shoppers will gain the right to complain to the Financial Ombudsman, bringing BNPL in line with other credit products.
- Regulatory Oversight: Oversight will shift to the Financial Conduct Authority (FCA), replacing outdated and confusing rules.
These changes aim to provide clearer information to consumers and prevent unmanageable debt accumulation.
Consumer Impact and Industry Response
The reforms are a response to alarming statistics: a report by the FCA revealed that one in ten people were unable to pay essential bills, with millions more using BNPL products over the past three years. Additionally, Money Wellness reported a 68% increase in individuals seeking help with BNPL debt in the past year.
Consumer advocacy groups have welcomed the changes. Tom MacInnes, director of policy at Citizens Advice, emphasized the need for swift action by the FCA to establish strong consumer safeguards.
BNPL providers have also shown support. A Clearpay spokesperson noted that nearly half of UK adults are more likely to use BNPL once regulation is passed, with 71% believing it’s important for BNPL to be subject to UK financial legislation.Finextra Research
Timeline and Future Outlook
The legislation is expected to be laid in Parliament on May 19, 2025, with the new rules anticipated to come into effect in 2026. This regulatory shift aims to foster trust among consumers and create a sustainable foundation for the future growth of BNPL as an everyday payment option.
As the UK moves to regulate the BNPL sector, the focus remains on balancing consumer protection with the continued innovation and accessibility that BNPL services offer.