UK to enact new regulations on ‘wild west’ BNPL industry

The UK government has outlined plans to regulate the operations of buy now, pay later (BNPL) firms as it aims for more transparency among the industry. The HM Treasury said BNPL firms will need to follow “consistent standards”, including upfront checks, to ensure shoppers can repay what they borrow.

The plans also detail “fairer and faster access to refunds” and “the right to complain to the Financial Ombudsman”, aligning BNPL with other credit providers. The government stated that such changes intend to boost consumer confidence while also giving firms the certainty needed to grow and invest.

In a release, Emma Reynolds, economic secretary to the Treasury, said: “BNPL has transformed shopping for millions, but for too long has operated as a wild west - leaving consumers exposed. These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow and create jobs through our Plan for Change.”

Reynolds’ comment comes in response to the consultation on BNPL, first announced in October 2024. The government has further confirmed that the legislation bringing BNPL into regulation will be laid in Parliament on May 19.

The government had initially outlined draft legislation looking to regulate BNPL credit in 2023, after it was determined that the sector could be harmful to consumers and currently remains largely unregulated in the UK, lacking affordability checks on its offering of short-term loans.

The latest update aligns with new reforms to the Consumer Credit Act, which will replace the old regime with a “pro-growth framework that reflects how people borrow today”. The FCA’s “more flexible” system will come into focus instead.