Buy Now Pay Later (BNPL): Your Rights and the New FCA Rules

BNPL is short-term unsecured credit. The retailer offers you a way to split the price of a purchase into instalments — typically three or four — paid weekly or fortnightly, with no interest if you pay on time. The provider (Klarna, Clearpay, PayPal Pay in 3, Laybuy, Zilch and others) pays the retailer up-front and collects from you over the instalment period.

Under the current rules, these products fall within the exempt agreement carve-out in article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 — short-term, interest-free agreements requiring four or fewer instalments within twelve months. That means BNPL providers are not currently authorised by the FCA, do not need to carry out the same affordability checks as a regulated lender, and complaints do not have a right of referral to the Financial Ombudsman Service.

This loophole is closing. After multiple consultations from 2021 onwards, the government confirmed in 2024 that BNPL will come within FCA regulation. The intended go-live is 2026 (the original 2024 date slipped). Until full regulation begins, providers are operating under a voluntary FCA code.

Even before formal FCA rules apply, you already have meaningful protections.

• Consumer Rights Act 2015 — if the goods are faulty, not as described, or do not match the sample, your rights against the retailer are unaffected by how you paid. You can ask for a refund, repair, or replacement in the normal way.
• Section 75 Consumer Credit Act 1974 — if you used a credit card to pay any of the BNPL instalments, the card issuer is jointly and severally liable with the retailer for any breach of contract or misrepresentation, provided the cash price of the item was £100–£30,000. This is the strongest BNPL protection currently available.
• Section 56 CCA agency — for credit-card BNPL, statements by the retailer are deemed to be made on behalf of the credit-card issuer.
• Chargeback — if you paid by debit card, ask your bank for a chargeback. It is not a legal right but most card schemes (Visa, Mastercard) honour it for failed delivery, faulty goods, or merchant misrepresentation.
• FCA voluntary code (May 2024 onwards) — Klarna, Clearpay, and the major providers have signed up to a code that includes affordability checks, clear pre-contract information, and a commitment to use ADR (Alternative Dispute Resolution) for unresolved complaints. The code is enforceable through the FCA's regulatory perimeter even before formal regulation begins.

BNPL missed payments are now reportable to Experian and Equifax from June 2022 onwards. Late payments and account openings appear on your credit file and affect future credit applications.

Once FCA regulation takes effect, BNPL will be on broadly the same legal footing as other regulated consumer credit. The headline changes:

• Authorisation — BNPL providers will need full FCA authorisation (or interim permission during transition). Trading without authorisation will be a criminal offence.
• Mandatory affordability checks — providers will have to assess whether you can afford the BNPL repayments before extending credit, using the FCA's CONC affordability rules.
• Pre-contract information — providers will have to give clear standardised information including the total amount of credit, the schedule of payments, the consequences of missing a payment, and the right to withdraw within 14 days.
• Section 75 protection will likely apply directly to regulated BNPL agreements (subject to the £100 minimum cash price threshold).
• Right to refer to the Financial Ombudsman Service — once FCA-authorised, BNPL providers must be members of FOS, giving you a free, independent dispute-resolution route after exhausting their internal complaints process.
• FSCS protection may apply to certain claims if a provider becomes insolvent, depending on the final scope of the regulation.

The detailed rules will be set out in updates to the Consumer Credit Act 1974 and the FCA's Consumer Credit sourcebook (CONC). Watch GOV.UK and the FCA Handbook for confirmation when the start date is fixed.

The right action depends on the problem:

1. Faulty or undelivered goods — first contact the retailer using your Consumer Rights Act 2015 rights. The BNPL provider is not the retailer; pause the BNPL payments only if the provider's terms allow you to. If the retailer refuses, escalate via Section 75 (credit card) or chargeback (debit card), and complain to the BNPL provider in parallel.
2. BNPL administration error (incorrect charge, duplicate payment, account opened in your name without authorisation) — complain in writing to the BNPL provider. They have 8 weeks to give a final response under the FCA voluntary code. If unsatisfied, refer to the relevant ADR scheme listed in the provider's terms.
3. Missed payment because you cannot afford it — contact the provider before the due date. Most providers offer payment plans without late fees if you engage early. After regulation begins, BNPL will be subject to FCA forbearance rules and you can request a Breathing Space moratorium (covers BNPL debts already).
4. Identity fraud — report to Action Fraud (0300 123 2040), notify the BNPL provider, and request a fraud marker on your credit file via Cifas.
5. Mis-selling or unaffordable lending — once formal FCA regulation begins, complain to the provider then escalate to the Financial Ombudsman Service. Pre-regulation complaints can still be raised under the FCA voluntary code; the FOS may take cases on a case-by-case basis where the firm has agreed to the code.

If BNPL has tipped you into wider problem debt, get free advice immediately from National Debtline, StepChange, or Citizens Advice. BNPL debts are eligible for Breathing Space, Debt Relief Orders, and IVAs.