The Financial Conduct Authority (FCA) has unveiled long-awaited plans to regulate the booming £13 billion ‘buy now, pay later’ (BNPL) sector — with proposals that could require affordability checks on even the smallest of loans.
Under the new rules, which form part of a formal consultation launched on Friday, BNPL lenders would need to conduct creditworthiness assessments on loans under £50 — a measure the regulator says is necessary to protect consumers from spiralling debt and financial harm.
The FCA said BNPL has evolved from a fringe product into a mainstream payment method, used by 10.9 million UK adults in the 12 months to May 2024. Around 1.1 million of these individuals had BNPL debts of £500 or more, while more than 5 million owed at least £50. Over half of all BNPL agreements currently involve loans under £50, which the FCA argues must be included in the scope of new rules to prevent widespread harm and “loan stacking” across multiple providers.
The proposals mark a significant shift in how short-term credit is treated, with firms like Klarna, Clearpay and Laybuy among the major lenders expected to come under the new regime.
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