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UK BNPL lenders need FCA approval as new consumer rules begin
The Financial Ombudsman Service expects to handle about 2,000 BNPL complaints by the end of March after new unresolved cases can be referred for independent adjudication.
BBC Business reports that new UK rules for buy now, pay later (BNPL) are taking effect, requiring BNPL lenders to have regulator approval to operate. The change is intended to strengthen consumer protections, including access to refunds and independent rulings when complaints are unresolved.
Under the new regime, only lenders authorised by the Financial Conduct Authority (FCA) can offer BNPL services. Customers with unresolved complaints can refer cases to the Financial Ombudsman Service (FOS) for adjudication, and the FOS expects to deal with about 2,000 cases by the end of March.
The sector has grown rapidly through providers such as Klarna and Clearpay, but campaigners have warned it operated like an unregulated market. BBC Business notes regulators say affordability checks should reduce the risk of customers taking on debt they cannot afford.
Not-for-profit Fair4All Finance chief executive Kate Pender said her research suggests 10% to 30% of BNPL users could fail conservative affordability checks, which could mean some shoppers are refused for the first time. Klarna’s spokesman said the rules largely formalise existing practices including affordability checks, cost disclosures upfront, and reporting to credit reference agencies.