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"Buy-Now, Pay-Later is a wolf in sheep's clothing": New rules will give millions of users key protections

ended 17. October 2024

Millions of shoppers are set to be protected by new rules for Buy-Now, Pay-Later products, the Treasury has announced.  

Buy-Now, Pay-Later products have become increasingly popular in recent years as they allow people to spread the cost of purchases over time, but users currently do not have access to a range of key protections provided by other consumer credit products.  

The Government has today launched a consultation on proposals to fix this by bringing Buy-Now, Pay-Later companies under the supervision of the Financial Conduct Authority (FCA) and applying the Consumer Credit Act, ensuring users receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.  

Economic Secretary to the Treasury Tulip Siddiq said:     

Millions of people use Buy-Now, Pay-Later to manage their finances, but the previous government’s dither and delay left them unprotected.     

We promised to take action before the election and now we are delivering. Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow.

The new rules will allow the FCA to apply rules on affordability – meaning that Buy-Now, Pay-Later companies will have to check that shoppers are able to afford repayments before offering a loan, which will help to prevent people building up unmanageable debt. Newspage asked experts for their views, below.

5 responses from the Newspage community

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Daniel Hobbs
Managing Director at New Leaf Distribution
Buy-Now Pay-Later practices have become ridiculous. It’s mental that you can now use these credit providers to buy dog biscuits and low value items. Consumers don’t realise how this can affect their credit reports, which as we know will in turn affect their ability to obtain a mortgage. It’s also a slippery slope for some, who rely on this way of spending to buy more and more items when they really can’t afford to do it.
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Ben Perks
Managing Director at Orchard Financial Advisers
This is long overdue. Buy-Now, Pay-Later is a wolf in sheep's clothing.
When I saw recently that you can buy a Domino's Pizza on Klarna I was flabbergasted. If you're not savvy, you could easily sleep-walk into major debt. The ease of access and casual attitude towards using Buy Now, Pay Later can be devastating and many don't realise how it can hamper your mortgage borrowing capabilities.
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Rita Kohli
Managing Director at The Mortgage Stop
It’s about time. Easy credit has got a lot of people into trouble without them realising it and when they really need to borrow for a mortgage as an example often they are left devastated by the impact of decisions which they originally felt had little or no risk.
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Jack Tutton
Director at SJ Mortgages
We have seen people take out this type of product far too many times without understanding the impact it can have on their credit scores. This is especially the case when things go wrong with these arrangements if issues arise. These changes mean that companies have to take greater care when it comes to offering this type of finance to consumers, ensuring only the people that can genuinely afford the products they are buying can take the finance. These new rules are long overdue and much needed. It has become far too easy to buy even the most basic of things on a Buy-Now Pay-Later agreement.
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Patricia McGirr
Founder at Repossession Rescue Network
The government’s decision to finally regulate Buy-Now, Pay-Later products is a welcome but long overdue change. For years, we’ve seen people fall into unmanageable unsecured debt because of a lack of proper safeguards. While it’s positive that the FCA will now ensure affordability checks and clearer information for shoppers, this is just the beginning. Strong consumer protection is essential, but we must also focus on preventing borrowers from falling into financial distress in the first place. As someone who fights to protect those facing repossession, I know how damaging unchecked debt can be. These rules must be enforced with real teeth, not just affordability checks but stopping firms levying ridiculous interest rates on those who can least afford it.