In the UK, the popularity of “buy now, pay later” (BNPL) services has skyrocketed, with millions of shoppers using it to manage their spending. It seems like a convenient way to buy things without paying the full price upfront, but there’s a catch. Many people have been getting into debt because they borrow more than they can actually afford. To tackle this problem, the UK government is bringing in new rules to help protect consumers. However, these new regulations won’t come into effect until 2026, which has left some experts and campaigners questioning the delay.

Why Are These Rules Important?

BNPL services like Klarna and Clearpay allow shoppers to spread out the cost of their purchases over time. You’ve probably seen these options at the checkout when shopping online. The best part? They don’t charge interest. But, what seems like a great deal on the surface can quickly turn into a financial mess if you’re not careful. People have found themselves in trouble by racking up debt they can’t pay off.

Last year, research by the Financial Conduct Authority (FCA) found that 14 million people had used BNPL services. The same study also found that frequent users of these services were more than four times as likely to have missed payments for other bills or loans compared to people who didn’t use BNPL. This shows that while BNPL can be helpful, it can also lead to serious financial problems if people aren’t fully aware of what they’re getting into.

What Will the New Rules Do?

The UK government’s new rules aim to provide stronger protection for shoppers. First and foremost, BNPL companies will need to run “affordability checks” before allowing someone to sign up for a loan. This means companies like Klarna will have to check if you can actually afford to pay back what you borrow. It’s a similar process to what happens when you apply for a credit card.

The new regulations will also bring the BNPL sector under the control of the FCA, the UK’s financial watchdog. This will ensure that companies offering BNPL services provide clear and simple information about the loan agreements. So, when you decide to use BNPL at the checkout, you’ll have a better understanding of what you’re signing up for. There will also be rules about what happens if you miss a payment or can’t pay on time.

One of the key benefits for consumers is that they’ll be protected under something called Section 75 of the Consumer Credit Act. This law already protects people who buy things using a credit card. If you buy something that costs between £100 and £30,000, and there’s an issue—like the product being faulty or the company not delivering it as promised—you can claim a refund. The new rules will extend this protection to BNPL purchases, giving consumers more confidence when they use these services.

Why the Delay Until 2026?

While the new rules sound great, many are wondering why it will take until 2026 for them to be enforced. Campaigners like Martin Lewis, the founder of MoneySavingExpert, have been pushing for regulation of BNPL for years. He called it a “travesty” that the sector has gone unregulated for so long, especially since BNPL is now available at most online checkouts. He was pleased that the new government is finally making changes, but he warned that people need to be cautious until the new rules are in place.

Lewis isn’t the only one concerned. Labour MP Stella Creasy has also been a strong advocate for tougher rules on BNPL companies. She said that for years, these companies have encouraged people to borrow more than they can afford, leading them into a “cycle of debt.” Creasy doesn’t understand why it will take another two years before consumers are fully protected. She pointed out that people are more protected when they use a credit card or even a payday loan than when they use BNPL services.

The timing of this delay is particularly worrying as Christmas approaches. During the holiday season, many people turn to BNPL services to spread out the cost of gifts and other expenses. Creasy stressed that without proper regulation, shoppers could end up in even deeper debt during this time of year.

What’s Next?

Although the new rules won’t come into effect until 2026, there are still steps consumers can take to protect themselves in the meantime. First, it’s important to understand that even though BNPL services don’t charge interest, they still come with risks. Missed payments can lead to extra fees, and failing to pay off your balance can hurt your credit score.

Before using BNPL, shoppers should make sure they fully understand the terms of the agreement. Can you afford the monthly payments? What will happen if you miss a payment? Taking the time to ask these questions can save you from a lot of stress down the line.

The government is expected to hold a consultation on the new rules until 29 November, which means they are moving forward. Economic Secretary to the Treasury, Tulip Siddiq, emphasized that the government is acting now to protect shoppers after the previous administration didn’t take action. She said that these new rules will not only help shoppers but also give BNPL companies the certainty they need to grow and innovate in the market.

Final Thoughts

BNPL can be a helpful tool for managing your finances if used carefully. But without the right protections in place, it can also lead to serious debt problems. While the UK government’s new rules are a step in the right direction, the fact that they won’t come into effect until 2026 means that shoppers need to stay cautious for the next two years. Until then, it’s essential to use BNPL services responsibly and be aware of the risks involved.