Most Buy Now, Pay Later users unaware of new UK rules

Compare the Market has published research showing that most Buy Now, Pay Later users are unaware of new UK regulations as the sector comes under Financial Conduct Authority oversight for the first time.

A survey of 3,000 UK adults found that 59% of Buy Now, Pay Later users had not heard about the rule changes. Awareness was lower among older consumers, with 73% of over-55s saying they were unaware of the new framework.

The changes require providers to carry out affordability and creditworthiness checks before approving credit. They also introduce stronger consumer protections, including Section 75 purchase protection for eligible transactions.

The figures suggest Buy Now, Pay Later is now a mainstream form of borrowing, with 48% of UK adults saying they use these products.

Day-to-day spending also featured in the research. One in 10 people said they use Buy Now, Pay Later at least once a month for essential spending, such as groceries and household bills, with the rate rising to 17% among those aged 18 to 34.

Among younger users, nearly three in 10 had used the payment method for takeaways and food delivery. This points to the growing use of short-term credit beyond retail purchases such as clothes, electronics and household goods.

Credit concerns

The research also examined how consumers feel about applying for credit more broadly. Just 31% of UK adults said they felt confident applying for traditional credit products, while 14% said they avoided applying for fear of rejection.

That anxiety appears relevant to the new checks at online checkouts. Asked what they would do if they were declined for Buy Now, Pay Later, 19% said they would use cash savings or a debit card, 14% said they would abandon the purchase altogether, and 6% said they would consider higher-cost forms of credit.

The figures suggest a rejected application could immediately change spending decisions for some households. They also indicate that a minority may turn to more expensive borrowing when an instalment option is not available.

Abi Foster, Author, Broadcaster and Personal Finance Expert at Compare the Market, offered guidance on how consumers should view the new process.

"Many of us have experienced that sinking feeling of worrying about a credit application being rejected. It's understandable that this concern is putting some people off applying altogether, but it's important not to let fear of rejection stop you from exploring your options.

"The new Buy Now, Pay Later affordability checks are there to help make sure people aren't taking on borrowing they may struggle to repay. While it can feel like an extra hurdle at checkout, the aim is to protect consumers and encourage more responsible lending.

"It's also worth remembering that these checks will often involve a soft credit search. Unlike a hard search, a soft search typically won't affect your credit score and isn't visible to other lenders, so it shouldn't be a cause for concern if you're asked to go through one.

"If you are declined for Buy Now, Pay Later, try not to see it as a setback. It can be an opportunity to pause and reassess whether the purchase is affordable right now. Avoid rushing into more expensive forms of borrowing, as these can create bigger financial challenges in the long run.

"If you're unsure why you were declined, checking your credit report, reviewing your budget and speaking to the lender can help you better understand your options. Taking a little extra time before borrowing can make a real difference to your long-term financial wellbeing. Comparing different financial products and understanding how lenders assess affordability can also help you make more informed borrowing decisions."

Rules change

The new regime marks a significant shift for a fast-growing part of the consumer credit market. Buy Now, Pay Later products have often been presented as a simple way to spread costs, but regulators have moved to bring them into line with more established credit products.

Under the rules, lenders must assess whether borrowers can afford repayments and whether the credit is suitable. The checks are likely to make the checkout process more like other forms of borrowing, even when credit is offered in small sums over short periods.

"Buy Now, Pay Later has become an increasingly popular way for people to spread the cost of purchases, but many shoppers may not realise that the rules are changing. As these new regulations come into effect, it's important that consumers understand both the protections available to them and what to expect when using BNPL products," said Sajni Shah, Compare the Market's Personal Finance expert.

"The changes are designed to bring greater transparency and stronger safeguards for borrowers, including clearer information about how products work and additional routes for support if something goes wrong.

"Whether you're considering Buy Now, Pay Later or any other form of credit, taking the time to understand the terms, compare your options and ensure repayments fit comfortably within your budget can help you make more confident financial decisions."