Buy Now, Pay Later Shake-Up Explained As Shoppers Face Being Refused Credit

The Financial Conduct Authority (FCA) has just announced that buy now, pay late is going to be full regulated from July, 2026 – here what you need to know

In recent years, a new form of ‘free’ credit has revolutionized the way we have brits Shop. IT’S SIMPLE, POPULAR AND YOU CAN USE IT TO BUY PRETY ANYTHING YOU CAN THINK OF, From Clothes to Cars.

Buy Now, Pay Later (BNPL) Credit is available at virtuely every online store you visits. Retilers love it, Because it allows us all to buy more than we can affford. IT ALSO MAKES US MORE LIKELY TO COMMIT TO BUY WHAT’S IN THE ONLINE BASKET, RATHER THAN WALKING AWAY IF MONEY IS TIGHT THAT MONTH.

Credit firms love it as they are paid in a variety of ways for offering this type of lending on behalf of retailers. And MANY READERS LOVE IT TOO, AS I FINT OUT EVERY TIME I WRITE ABOUT MY BNPL Concerns criticise aspects of the industry!

But Those Concerns are Justified. Bnpl allows, or events encourages people to ‘sleepwalk’ in to debt, by MAKING IASIER TO PURCHASE THINGS WE NEATHER OR NEED – AND CANE AFFORD.

Its been use for Silly, Frivolous Purchases like pizza. And Mostrningly, some firms have been worryingly Quick to lend to people massif in debt, or to pass on outstanding balances to debt collectors far too.

So it is good news that that the regulator, the financial Conduct authority (FCA) has just announced that bnpl is going to be fully regulated from 15 July, 2026. Here’s my guide to how bnpl works.

What is Buy Now, Pay Late Credit?

BNPL WORKS BY GIVING YOU A SHORT-TERM LOAN, with or with interest, so you can buy good or serving you can’t affford to pay the full price up.

Retaillers have been active flush bnpl credit and you’ll be hard pressed to find one that doesn’t offer bnpl you Shop online. There are three main types of bnpl credit.

Limited Installations

The Most Well-Known Form of BNPPL Deal Works by Letting you pay in a limited number of interest-free installations-usually in three payments. This Means You Can Buy Things Up Front That You May Not Have the Money for in Full at Point of Purchase. Howver, You Haven Committed to Buy. This is unregulated at the moment.

TRY BEFORE YOU BUY

This is where you have a short period of time – usually 30 days but somehoes as Low as 14 days – to ‘insct’ goods before commmitting to buy.

These deals allow you to try things on, check goods out and see if they work for you before the bud. Howver, if you don’t return the goods on time, you coulud you’ve bought say. Bear in Mind the 14 days JUST MIRRORS YOUR EXISTING Online Shopping Rights Under the Consumer Rights Act. This is unregulated at the moment.

Credit AGREEMENTS

These deals are closer to the Older Credit Deals in that you pay instalments over a longer period and pay interest. This isn’t as high as some retailers charged in the past – it”s usually mess than Credit interest – but is still than a standard Bank Loan.

How Popular Is Buy Now, Pay Later Lending?

There are lots of different typers of regulated credit aggrement out there. These Include:

• Personal loans
• Overdrafts
• Car Finance
• Short Term, High Interest Loans (Formly Payday Lending, But Over Longer Periods of Time)
• Catalogue Credit
• Regulated bnpl loans

Unregulated Buy Now, Pay Later Loans Are Reference to the Regulator as’ Deferred Payment Credit (DPCS) – and they are massively popular.

IT’s estimated that around 11 million People used bnpl Credit LAST YEAR ALONE FOR SHORT TERM BORROWING. That 20% of all adults (up 3% from the year before). Howver, 1.1 Million People Had Over £ 500 Outstanding on their unregulated bnpl loans. JUST UNDER 10% of People Used Bnpl to Pay for Essential Goods, Like Food or Utility Bills.

What happens if you can’t pay?

While bnpl firms May Not Charge Debt Interest, Many Readers have Reported That Businesses Are Quick to Debts to Debt Collectors Who Have a Whole Range of Penalties and Pressure Tactics They Can Apply – and They Can Financial Debts with Creedcies. Worryingly, this Can Happen for Relative Small Sums.

What would the new rules say?

Acciting to the FCA, From Next Year Businesses Offering BNPL WILL HAVE TO:

• Carry Out upfront checks to make Sure People Can Repay what they borrow.
• Offer ‘Fairer and Faster Access to Refunds’
• You’ll also have the right to complain to the financial ombudsman like other regulated forms of credit.

At Present, BNPL FIRMS ARE RATHER VAGUE ABOUT THE CHOPKS THEY UNDERTAKE TO SEE IF YOU CAN AFFORD TO BORROW MONEY. With the Most forms of Lending the Business Will undertake a ‘Soft’ or ‘Hard’ Credit Check to See If You Can Afford to Borrow. Soft Checks don’t go on to your Credit File, Hard Ones Do.

If the boors doesn’t check your credit file, it won’t know how Much you’ve borrowed – whic means you might be hopelessly in debt and they won’t know. You might also have multiple bnpl loans too. At the Height of the Payday Lawing Franny, the Avërage Number of Loans for BorroWer was Seven. SO People Were Drowning in Debt and Just Getting in Deeper.

These new proposals will mean that stricter AFFORDABILITY VILL BE REQUIRED WHICH SHOLD Identify People who are overstretched financially and are already in debt. The fca estimates that over the next decade, this will mean that People will be £ 1.8 Billion Better off. Assuming that they don’t borrow Money Elsewhere instead, that is.

• Martyn James is a leading consumer Rights Campaigner, TV and Radio Broadcaster and Journalist