Millions of Brits use Buy Now, Pay Later to shop. Will new rules protect people from the dangers?

For Alannah-Jayne Simpson and her young family, Buy Now, Pay Later (BNPL) schemes have been a lifeline during times when money is tight.

“It helps us be able to survive without too much struggle,” the 30-year-old mother-of-two says. “We use it to pay our rent, bills and food shop. It helps us a lot. If we want to go out for a day as a family and get something to eat, we use that.”

Simpson is one of more than 360 million people who use BNPL worldwide. They allow people to buy items and spread payments over time, typically interest-free.

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Polling from personal finance company Finder shows that two in five Brits have used them at least once, representing 22.6 million people – and a further one in 10 think they might use them in the future.

But BNPL has dangers. There is risk of debt which can impact credit score and lead to court action and bailiff visits, and there may be hidden charges, such as late fees. And for the most part, BNPL has gone unregulated.

The UK government recently announced that it will be introducing new rules to end the “wild west” of BNPL. From next year, firms will have to follow consistent standards so shoppers are informed of the risks, affordability and where to get help for debt if needed.

Emma Reynolds, economic secretary to the Treasury, said: “Buy Now, Pay Later has transformed shopping for millions, but for too long has operated as a wild west – leaving consumers exposed. These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs.”

Research from debt charity StepChange found that BNPL users are twice as likely than all credit users to borrow money to cover essential bills.

Simpson says it is “very tempting” to use BNPL for non-essential items too. “You can get caught up in loads of payments being due at one time, and it is quite overwhelming.”

She and her partner are both disabled and she is unable to work, suffering from health conditions including Crohn’s and Ehlers-Danlos Syndrome. The family, with boys aged four and one, faced homelessness last year and have battled with financial insecurity.

Supported by StepChange, they have been debt-free for two years, but with the cost of living increasing, they still need help to buy essentials. Simpson hopes that in the future they will be able to afford to live without BNPL schemes, but for now, she feels they are vital for keeping their family afloat.

Vikki Brownridge, chief executive of StepChange, says: “Whilst BNPL can be a useful budgeting tool, it can deepen debt problems, and it is important struggling consumers are afforded the same level of protection as for other forms of credit.”

The government’s new rules, coming into force from next July, will mean shoppers will have to pass stricter affordability checks – which regulators hope will prevent people from taking out too much debt or being caught out by late fees.

“Bringing BNPL firms in line with the wider credit market will provide an added layer of protections for consumers, a much needed change,” Brownridge says.

BNPL is now as common as using an overdraft among UK adults, according to StepChange.

Simon Dukes, chief executive at not-for-profit lending company Fair For You, said he does not believe that BNPL should be abolished, but he agrees with the need for regulation.

“They’ve got a place. I think the issue for me, and for many in the responsible-lending space, is about the fact that they need to be regulated in order to ensure people are treated on a level playing field. They need to have affordability checks built in,” Dukes says.

Fair For You, which was previously supported by Big Issue Invest, provides affordable loans to help customers buy essential products like white goods, furniture and gadgets. They can repay on their own terms – weekly, fortnightly, four-weekly or monthly – and borrow for as long or short a period as they like. 

It looks at more than credit score to determine what is affordable to a customer, meaning people may be able to get a loan even if other lenders have turned them down. There is a monthly interest rate of 4.25%, more than BNPL but among the lowest in the industry.

“Every single time you repay a Fair For You loan, your credit file is positively repaired – even with small amounts of money,” Duke explains, claiming that by comparison BNPL seems to have an “allergic relationship with credit reference agencies”.

Fair For You also works with Iceland for its Food Club, giving people a small loan of between £25 and £75 to spread the cost of household groceries. Repayments are £10 a week. 

“I’m a great believer in the power of micro-lending,” Dukes says.

The Financial Conduct Authority (FCA) confirmed in July that BNPL products would be brought into their remit and firms will have to follow their rules, just like Fair For You and other regulated lenders.

Its researchers found that in May 2024, more than one million people had £500 or more outstanding unregulated BNPL debt, and 11% of UK adults (5.3 million) had £50 or more outstanding. 

The highest rate of use was among adults aged 25 to 34, of whom nearly a third had used BNPL schemes in the 12 months up to May 2024. 

Emma Quinn, a 33-year-old from Newcastle who is due to start studying for a PhD, says there have been times in her life when BNPL schemes were “really appealing”.

She has bipolar disorder and was very unwell around eight years ago, which impacted her financial situation and left her unable to work. She believes she “would never have considered” BNPL if she was in a more stable financial position.

“When I was earning, I never considered things like that. If I had money, I would buy things. If I didn’t have money, I just wouldn’t – whereas when I consistently didn’t have money for a number of years, because of my mental health, nothing was affordable,” Quinn says.

Quinn received support from her family and partner, who urged her to avoid BNPL. 

“I gave my dad access to my bank accounts so that he could see if there were abnormal spending patterns with mania. I was lucky that I’ve got people I can trust who can help me when I’m not well. If I hadn’t had them, I probably would have amassed even more debt. 

“It’s a vulnerable thing to do, and it needs to be someone that you trust. It leaves you open to financial abuse, giving someone partial control of your finances. But for me, it was right.”

Helen Undy, chief executive of the Money and Mental Health Policy Institute, points out that BNPL poses “particular risks for people with mental health problems, who can find it challenging to control spending”. 

Undy says: “It is welcome that BNPL providers will have to check that people can afford to repay BNPL loans and to offer support if they get into financial difficulty – holding them to similar standards to other lenders. At a time when consumer protection sometimes feels under threat, it’s a positive step.”

Quinn says she is “pleased” BNPL will be regulated and adds that it was “appalling” that people could “take out thousands of pounds of store credit but not be credit-checked in the same way as trying to apply for credit from a bank”.

However, she had a good credit score so would likely still have been accepted despite her vulnerability.

“If circumstances change and then you can’t pay it back, there’s still not that protection there,” Quinn adds. “It’s good that it’s going to be more difficult to get approved, but once you are approved, the vulnerability is still there.”

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