Finance Matters Insights
Klarna, Clearpay and the new BNPL rules from 15 July 2026
If you've ever split a purchase into instalments with Klarna, Clearpay, or PayPal Credit, this will be particularly relevant for you. As of 15 July, Buy Now Pay Later will be formally regulated by the Financial Conduct Authority (FCA).
Here's what that actually means.
🗒️ BNPL
In 2017, the UK BNPL market was worth around £60 million. By 2024, it had grown to over £13 billion, with around 20% of UK adults (10.9 million people) having used it in the previous year.
Whilst BNPL has grown at a staggering pace, it has remained in something of a regulatory grey area. Because many products were interest-free, providers didn't always have to follow the same rules that apply to credit cards, personal loans, and overdrafts.
💡 What's changing
The core issue has always been that BNPL felt easier than borrowing, but functionally still was borrowing. The new rules directly address the biggest gaps.
- Affordability checks: Historically, lenders weren't required to check whether you could actually afford the repayments. From 15 July, they must carry out proportionate creditworthiness assessments on every transaction, including small ones under £50.
- Enhanced transparency: Because BNPL didn't always show on your credit file, people could hold multiple agreements at once without any single view of the total. Consumers must now be given clear details upfront about the agreement, when payments are due, how much, and what happens if they miss one.
- Financial Ombudsman Service: If something goes wrong with a BNPL agreement entered into on or after 15 July, you can escalate the complaint to the FOS. This is the same route used for credit card and mortgage complaints.
- Section 75 protections. For new BNPL agreements involving purchases over £100, you'll now get similar protections to credit card users. If the seller goes bust or the item never arrives, the BNPL provider is jointly liable.
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Backdated interest now banned: Where BNPL included a 0% promotional period and you missed the deadline, lenders used to backdate interest to the original purchase date. That's no longer allowed.
📌 Worth noting:
→ Only agreements entered into on or after 15 July are covered. If you have active BNPL agreements from before Regulation Day, you're still on the old rules. No FOS access, no Section 75, no backdated interest ban. So anything you signed up to before 15 July stays under the previous regime until it's paid off.
→ Only third-party BNPL is regulated. The rules apply when the lender is a separate company to the retailer (e.g. Klarna, Clearpay, PayPal Credit). If the retailer runs its own BNPL scheme (some fashion and furniture brands do), that arrangement is not covered by the new rules.
BNPL isn't inherently bad, in most cases, when used sensibly, it can help smooth cash flow on a purchase you were going to make anyway but it's important to note that it is still a form of borrowing.
If you're using BNPL as a substitute for affordability then it's worth reconsidering whether it's the right option altogether.
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F
Fisayo Martins
Founder at Finance Matters UK
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