On 19th May 2025, the UK Government published its long-awaited response to the October 2024 consultation on the regulation of BNPL services, putting an end to the BNPL ‘wild west’ by pulling third-party services under the Financial Conduct Authority’s (FCA) regulatory umbrella. This means that services offered by lenders such as Klarna, Clearpay and others will soon need to meet the same standards as other regulated credit products.

 

A Tighter Ship for a Growing Market

 

The new rules, expected to come into effect in 2026, will not ban BNPL - far from it. Instead, they aim to make it safer and more sustainable for everyone. 

Firms will be required to conduct affordability checks, ensure clear and fair advertising, and give consumers access to stronger protections, including the right to escalate complaints. Furthermore, the FCA will introduce a tailored disclosure regime to ensure customers are given the right information, at the right time, and in a way they will actually read and understand.

While the changes might appear modest, they represent a significant shift. The overarching goal is simple, as Emma Reynolds, Economic Secretary to the Treasury, put it:

 

“These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs.”

Emma Reynolds, Economic Secretary to the Treasury

 

Why Regulation Matters

 

BNPL usage has risen sharply in recent years. Approximately 2 in 5 UK adults (42%) have used BNPL at some point, up from 36% in 2019.

And while the convenience of BNPL is clear, it has come alongside rising personal debt. As of September 2024, the average unsecured debt per UK adult (including BNPL debt) rose to £4,308 up from £3,891 just two years prior.

These figures underline why regulation is necessary, not to restrict access, but to ensure BNPL is offered responsibly and transparently.

 

The Good News? Many Are Already Part-Way There

 

For established providers, the upcoming changes may not be as disruptive as they first appear. Many already have experience in regulated credit markets - whether through personal loans, credit cards, or partnerships with regulated entities. 

Firms already equipped with automated decisioning, open banking, or other third-party data integrations, will naturally adapt to these changes without compromising the speed and convenience BNPL customers have come to expect.

This is the beginning of a cultural shift. BNPL firms will need to treat these products with the same rigour as other regulated credit, applying responsible lending practices throughout the short-term credit model.

 

There’s Still Time to Catch Up

At LendingMetrics, we already support lenders across the regulated credit space with powerful, automated decisioning tools that align with FCA regulations. Our platforms are designed to be flexible, scalable, and built for compliance from day one.

We understand that BNPL providers are accustomed to a fast-moving, highly competitive market and we are here to help you adapt without slowing down.

If you’d like to talk to our team about how we can support your preparations for BNPL regulation, get in touch and book a free demo of our Auto Decision Platform today.