In a significant shift for consumers, the UK government has announced that a new regulatory framework for 'buy now pay later' (BNPL) schemes will come into effect on July 15, 2026. This legislative update aims to enhance consumer protections by implementing stricter checks on BNPL agreements, thereby aligning them more closely with traditional credit products. The decision follows earlier proposals made in 2021 to bring these financial services under formal regulation, reflecting increasing scrutiny over their impact on consumer finance.

Over 10 to 11 million people in the UK currently utilize BNPL services such as Clearpay, Klarna, Zilch, and Laybuy, which allow users to make purchases by spreading the payments into interest-free instalments. The upcoming regulatory changes are expected to affect all users of these services, introducing essential protections like the application of Section 75 of the Consumer Credit Act. This clause allows consumers to hold retailers jointly liable for any issues with their purchases made using credit, offering additional security to buyers.

The introduction of these regulations marks a pivotal moment in the evolution of consumer finance in the UK. With the growing popularity of BNPL schemes, concerns regarding responsible lending and consumer debt have surged. By 2026, consumers will benefit from enhanced protections, which may encourage more responsible use of credit and instil greater confidence in users of BNPL services, while also fostering a more regulated and secure marketplace for financial transactions.