Buy Now Pay Later: New FCA Rules From July 2026 and What They Mean for Your Wallet

The FCA's new rules bring BNPL products — technically called "deferred payment credit" — under the Consumer Credit Act. Three changes matter most:

Affordability checks become mandatory. Before offering you a BNPL agreement, lenders must run proportionate checks to confirm you can repay. This mirrors what happens when you apply for a personal loan or credit card. The days of splitting a £500 ASOS order into three payments with zero checks are over.

Clear terms upfront. Lenders must tell you — before you commit — when payments are due, how much each payment will be, and what happens if you miss one. Sounds basic. Currently, many BNPL providers bury these details.

Section 75 protection. This is the big one. From July, BNPL purchases will qualify for Section 75 of the Consumer Credit Act, which means if the goods are faulty or the retailer goes bust, you can claim a refund from the BNPL lender. This protection already applies to credit card purchases over £100 — now it extends to BNPL.

BNPL's growth has been staggering precisely because it felt frictionless. No credit check, no interest (usually), no paperwork. Just click "pay in 3" and worry about it later.

The problem is that "later" arrived for millions of people. Research from Citizens Advice found that one in ten BNPL users missed a payment, and one in four used BNPL to buy essentials like food and toiletries — a sign of financial stress, not consumer choice.

BNPL debt doesn't currently appear on your credit file in a standardised way. Some providers report to credit reference agencies; others don't. This means mortgage lenders and banks can't see the full picture when assessing your credit score. You could have five active BNPL agreements totalling £2,000 and your credit file wouldn't necessarily show it.

The FCA's affordability rules already require mortgage lenders and banks to check whether you can repay. BNPL had a regulatory carve-out that no longer makes sense given the scale of borrowing involved. The new rules close that gap.

The FCA's Financial Lives survey found that BNPL users were disproportionately likely to be in financial difficulty. Among 18-34 year olds, one in four had used BNPL in the previous 12 months, and a significant minority were using it for essentials like groceries — a red flag that BNPL had shifted from convenience tool to credit dependency.

Here's what the FCA regulation doesn't fully resolve: how BNPL data feeds into your credit file.

Once BNPL is regulated, lenders will almost certainly report agreements to credit reference agencies (Experian, Equifax, TransUnion) in a consistent format. This is a double-edged sword.

If you use BNPL occasionally and always pay on time, a visible track record of managed credit could marginally help your score. Regular, on-time repayments demonstrate reliability.

But if you have multiple active BNPL agreements — even small ones — mortgage lenders will see them. When a lender runs an affordability assessment for a mortgage, those £50 and £100 monthly BNPL commitments count as outgoings. With the Bank of England base rate at 3.75% and mortgage affordability already stretched, extra BNPL commitments could reduce what you're offered.

If you're planning to apply for a mortgage in the next 12 months, clear your BNPL balances first. Every pound of monthly commitment reduces your borrowing capacity.

The new rules have a significant gap. BNPL is only regulated when the lender and the retailer are different businesses. So Klarna financing your ASOS purchase? Regulated. But if a retailer offers its own in-house "pay later" scheme — where the same company sells the goods and provides the credit — that falls outside the new rules.

This matters because some of the most aggressive BNPL offerings come from retailers themselves. Furniture stores, electronics retailers, and dental practices that offer interest-free credit directly aren't caught by these regulations.

Also absent: a hard cap on late fees. The FCA requires lenders to treat customers in financial difficulty fairly and signpost free debt advice, but there's no specific fee ceiling. Late charges remain at the provider's discretion, though they'll be subject to the Consumer Duty's fair value requirements.

For consumers already in difficulty with debt, the new rules improve the situation — lenders must offer forbearance — but they don't eliminate the risk of spiralling balances.

Audit your BNPL. Log into every BNPL app you've used — Klarna, Clearpay, Laybuy, PayPal Pay in 3 — and check for outstanding balances. Many people have agreements they've forgotten about.

Clear what you can. Paying off BNPL balances before they start appearing consistently on credit files gives you a clean slate. This is especially important if you're planning a mortgage application.

Check your credit report. Use free services to see what BNPL data (if any) already appears. Experian, Equifax, and TransUnion each hold different data, so check all three.

Rethink your checkout habits. BNPL works brilliantly for genuinely spreading the cost of planned purchases. It works terribly as a way to buy things you can't afford. If you're using "pay in 3" because you don't have the money, that's not interest-free credit — it's debt with extra steps.

The new rules will make BNPL marginally harder to access, which is precisely the point. Friction at the checkout isn't a bug — it's a feature that protects you from borrowing you can't sustain.

If BNPL debt has spiralled, consider whether a 0% balance transfer card could consolidate what you owe interest-free. For a full picture of your borrowing options, see our personal loans guide.

This article is for informational purposes only and does not constitute financial advice. You should seek independent financial advice before making any investment decisions.