If you’ve ever shopped online and spotted the option to split your payment into smaller chunks over a few months, you’ve used what’s known as buy now, pay later.
It’s become a huge part of how people shop, but until recently, this type of borrowing operated with almost no proper rules behind it. That’s now changed, with new regulations designed to protect shoppers without shutting the option down completely. Here’s what’s actually changed, and what it means the next time you’re tempted to split a payment at checkout.
What buy now, pay later actually is
Buy now, pay later lets you spread the cost of something across several smaller payments instead of paying the full amount upfront. If you keep up with every payment, it effectively works out as an interest-free loan, which is exactly why it’s become so popular with online shoppers over the past few years.
The trouble comes when payments get missed. Falling behind can lead to late fees, and in some cases, it can even affect your credit score, something a lot of shoppers don’t fully realise when they first sign up at the checkout.
This kind of borrowing has grown massively in just a few years.
The scale of this industry has exploded in a remarkably short space of time. Regulators say the sector grew from being worth roughly £60 million back in 2017 to well over £13 billion by 2024, a staggering jump for such a young form of borrowing.
Despite that huge growth, this entire multi-billion pound market operated with essentially no formal regulation until very recently. Given how many people now rely on it regularly, that gap became increasingly hard to ignore.
Regulators decided it was time to step in.
These new rules didn’t come out of nowhere. They came after growing concern that people using these services weren’t always getting clear enough information about exactly what they’d agreed to, including what would happen if they couldn’t keep up with payments.
There was also concern that some people were being lent money they couldn’t afford to repay, leading to a spiral of missed payments and mounting late fees. Regulators wanted to close this gap without banning the option entirely, since it clearly serves a genuine purpose for a lot of shoppers when used properly.
You’ll now get much clearer information before you borrow.
One of the biggest changes is around transparency. Buy now, pay later companies now have to give consistent, clear information about exactly what you owe, when each payment is due, and what happens specifically if you’re unable to pay on time.
If you do happen to miss a payment, companies are now required to tell you straight away, rather than letting a late fee quietly build up in the background. This alone should help prevent people being caught off guard by charges they didn’t see coming.
Affordability checks are now compulsory, even for small purchases.
Companies must now check whether someone can afford a loan before agreeing to lend them money, something that wasn’t previously required by law. While plenty of companies claim they were already doing this voluntarily, it’s now a formal requirement across the entire industry.
Interestingly, this requirement even applies to loans under £50, though companies do have some flexibility in exactly how they carry out these checks for smaller amounts. The overall goal is making it much harder for anyone to be lent money they’re unlikely to be able to repay comfortably.
You’ll have stronger protection if something goes wrong with your purchase.
For purchases between £100 and £30,000, buy now, pay later companies are now jointly responsible alongside the retailer if something goes wrong, including situations where an item turns out to be faulty. This mirrors protections that already exist for credit card purchases, known as section 75 protections.
This gives shoppers an extra layer of security they didn’t have before, since previously any dispute over a faulty item purchased this way could leave someone feeling stuck between the retailer and the lender with nowhere clear to turn.
Where to turn if things go wrong, or if you’re struggling to pay
If you ever run into a problem with a buy now, pay later provider, you’ll now be able to escalate your complaint to the Financial Ombudsman, giving shoppers an official, independent route for resolving disputes. This wasn’t previously available in the same way for this type of borrowing.
For anyone who does fall into financial difficulty, companies must now redirect customers towards debt support services rather than simply passing them along to debt collection agencies. This change aims to help people get proper support and guidance rather than simply chasing repayment aggressively.
Not everyone thinks the changes go far enough.
Despite broadly welcoming the new rules, some experts have raised concerns about how they might play out in practice. One charity leader working in financial inclusion pointed out that recent research found nearly half of people likely to be rejected under the new affordability checks hadn’t actually missed a single buy now, pay later payment before.
The concern here is that tightening access doesn’t necessarily make someone’s underlying need for credit disappear entirely. Instead, people who get turned away might end up turning to more expensive or unregulated alternatives instead, which could ultimately leave them in a worse financial position than before.
What this all means for you as a shopper
If you regularly use buy now, pay later services, you should notice clearer information at checkout going forward, along with stronger protection if something you’ve bought turns out to be faulty or goes wrong. Missed payments should also be flagged to you immediately, rather than quietly turning into unexpected fees further down the line.
These changes aim to strike a balance, keeping buy now, pay later available as a useful option while making sure people fully understand what they’re signing up for. As with any form of borrowing, it’s still worth only using these services for purchases you’re confident you can comfortably repay.
