UK plans to regulate BNPL lenders

With the new set of rules, the government seeks to protect individuals who utilise BNPL solutions as a payment method, aiming to stop unregulated borrowing. The legislation requires lenders to conduct affordability checks to prevent consumers from taking on too much debt. Additionally, individuals can benefit from more efficient access to refunds while also having the ability to make complaints to the Financial Ombudsman.

Furthermore, lenders that deliver BNPL services will have to follow the same regulations as banks under the legislation, resulting in them being supervised by the Financial Conduct Authority (FCA). Commenting on the news, representatives from the UK government underlined that these rules focus on protecting shoppers from debt and equip the sector with the capabilities it needs to invest, expand, and create jobs. Additionally, the Treasury intends to reform the Consumer Credit Act to develop a modern, pro-growth framework.

The initiative comes four years after the UK initially announced its plans to regulate the sector, with the Treasury consulting on the idea in 2023, but delayed implementation of draft legislation. Companies operating in this sector expressed their interest in the government’s plans, with Klarna mentioning that interest-free BNPL is an important alternative to UK residents, with the firm supporting regulation to maintain its safety and accessibility. Also, Klarna aims to work with the FCA on rules to safeguard consumers and encourage innovation.

The rise of BNPL in the UK

The UK’s usage of BNPL services has witnessed considerable growth in recent years, and the sector is not projected to stop soon. According to Finder, in 2025, two in five UK adults (42%) have leveraged BNPL solutions at some point, a substantial increase from 36% at the beginning of 2023. Also, 9% of Brits plan to utilise BNPL in the future, with this taking the total number of users to 51% of the population.

Moreover, the UK BNPL market is projected to expand from GBP 29.85 billion in 2024 to GBP 47.27 billion by 2029. Considering this growth, UK regulatory bodies seek to control the sector, keeping the security of both consumers and companies while also advancing innovation in the region.