New Klarna, PayPal, and Clearpay rules for the UK
Key Points
- Buy Now Pay Later products from Klarna, PayPal, and Clearpay came under FCA regulation on 15 July 2026
- Providers must run affordability checks before offering credit at checkout
- Shoppers gain Section 75 style refund rights for faulty goods, matching credit card protections
- Consumers can escalate complaints to the free Financial Ombudsman Service
- Agreements taken out before 15 July 2026 remain unregulated
Millions of UK shoppers using Klarna, PayPal, and Clearpay gained new consumer protections on Wednesday (15 July) as Buy Now Pay Later regulation came into force.
The new rules bring Buy Now Pay Later products under the supervision of the Financial Conduct Authority (FCA) for the first time.
The sector has grown from £0.06 billion in 2017 to over £13 billion in 2024, with 10.9 million UK adults, or 20% of consumers, using it in the 12 months to May 2024, according to the FCA’s Financial Lives Survey.
Until today, anyone paying through a Buy Now Pay Later service at an online checkout had fewer rights than someone buying the same item with a credit card or personal loan.
What changes for shoppers
Providers must now carry out affordability checks before offering credit, so no one borrows more than they can realistically repay. Consumers get clear, upfront information about repayment dates, amounts, and the consequences of missing a payment.
Shoppers seeking a refund for faulty goods now have clear, enforceable rights to claim one. Section 75 of the Consumer Credit Act now applies to these agreements, giving buyers the same refund protection they would have when paying by credit card.
Anyone who falls into financial difficulty must first receive signposting to free debt advice and support rather than an immediate referral to a debt collector.
Consumers unhappy with a provider’s response to a complaint can also escalate it to the free, independent Financial Ombudsman Service.
Alison Walters, Director of Consumer Finance at the FCA, said millions of people use the products and will now benefit from “affordability checks, clearer information, and greater support” in difficulty.
The catches worth knowing
The protections only cover agreements entered into from 15 July 2026 onwards. Any agreement taken out before that date remains unregulated, and the new rights do not apply to it.
Coverage also depends on who provides the credit. Agreements are regulated when the lender and the retailer are different businesses. Credit provided directly by the same business selling the goods falls outside the regime.
Martin Lewis, founder of MoneySavingExpert.com, who campaigned for the regulation, said Buy Now Pay Later “done right, isn’t wrong” but warned that too many users build up unaffordable debt without realising it is a form of borrowing.
Lewis said most people won’t notice any difference day to day, as the changes primarily ensure responsible selling and protection when things go wrong.
Rocio Concha, Director of Policy and Advocacy at Which?, said shoppers should still check they can comfortably afford repayments before choosing the option at checkout.
Not every provider cleared the regulatory bar. Firms without FCA authorisation had to register for a temporary permissions regime before today, and any lender that missed the window can no longer enter into new agreements. Registered firms have six months to apply for full authorisation.
