If you checked out with Klarna last month and you check out with Klarna this month, the button looks the same. Three instalments, no interest, tap to confirm. What's different is everything behind that button. Since 15 July 2026, Buy Now, Pay Later has stopped being a checkout feature that sat outside consumer credit law and become a regulated financial product, sitting under the Financial Conduct Authority alongside your credit card and your car finance agreement.
That sounds like a technicality until you've actually been burned by a BNPL agreement — a missed instalment that turned into a debt collector's letter, a dispute with a retailer that nobody at Klarna wanted to touch, a credit application you didn't know had been checked. Those gaps are exactly what the new rules were built to close. And they took five years to arrive: the government first promised to regulate the sector back in 2021, shelved it, revived it, and finally got the legislation live this July.
What actually changed on 15 July
The core shift is a reclassification. BNPL agreements from providers like Klarna, Clearpay and PayPal are now legally defined as Deferred Payment Credit, or DPC, and treated as a regulated credit activity under the Consumer Credit Act framework. Providers must either hold full FCA authorisation or be trading under the regulator's Temporary Permissions Regime while their application is assessed — which, in practice, means every major BNPL brand you've heard of is now operating under FCA supervision in some form, even the ones still waiting on final sign-off.
Three consumer-facing changes matter more than the regulatory label. First, affordability and creditworthiness checks are now mandatory before a provider can approve you for BNPL credit — no more instant approval based on nothing but your email address and a soft device fingerprint. Second, you now have free access to the Financial Ombudsman Service if a BNPL provider won't resolve a complaint, the same route you'd use against a bank or a credit card issuer, and it costs you nothing to escalate. Third, Section 75 of the Consumer Credit Act now covers qualifying BNPL agreements between £100 and £30,000, which means if a retailer goes bust or sells you something faulty, your BNPL provider can be jointly liable for the refund — protection that Klarna users, in particular, have been asking for since gift cards and travel bookings started routinely going through BNPL.
None of this is retroactive. If you took out a Clearpay plan in June, it runs under the old rules until it's paid off. Only agreements opened from 15 July 2026 onward get the new protections, so if you're mid-plan and something goes wrong, don't assume Section 75 covers you — check the date on the agreement first.
Who's actually covered, and who isn't
Here's the catch that's tripping people up already: the rules only apply to third-party BNPL, where the lender is a separate company from the retailer you're buying from. Klarna, Clearpay and PayPal Credit all qualify, because none of them are the shop — they're a credit provider plugged into the shop's checkout. But if a retailer runs its own in-house instalment scheme, with no external lender involved, that arrangement sits outside the new framework entirely and keeps the old, lighter-touch rules. Furniture and electronics retailers with branded finance schemes are the main place this shows up, so read the fine print before assuming the FCA has your back.
This is worth sitting with for a second, because it means the protection you get depends entirely on which button you click at checkout — not on how similar the two options look. A £600 sofa split into four payments through Klarna is now a regulated credit agreement with ombudsman access. The same sofa split into four payments through the retailer's own "Pay in 4" scheme might not be. Nothing on the checkout screen tells you which one you're getting.
The scale of what's being regulated
This isn't a niche fix for a handful of edge cases. The FCA's own data puts BNPL usage at roughly 10.9 million UK adults — about one in five — in the year to May 2024, up from 17% in 2022. The market itself has gone from around £60 million in transaction value in 2017 to more than £13 billion by 2024, which is a faster growth curve than almost any other consumer credit product managed over the same period, credit cards included. Regulating something that size five years after promising to was overdue, not premature.
What to actually do differently now
Don't stop using BNPL out of caution — that's an overcorrection nobody asked for, and for a lot of purchases it's still the cheapest form of short-term credit you'll find, genuinely cheaper than a credit card's average APR if you clear it on time. What's worth doing is treating it like the credit product it now legally is. Check whether the retailer's checkout option is third-party (Klarna, Clearpay, PayPal) or in-house before you assume Section 75 applies. Expect a real affordability check on larger baskets — if a £400 purchase gets declined where a £150 one sailed through, that's the new checks working as intended, not a glitch.
Keep your BNPL agreements in view of your actual monthly budget rather than treating each one as a separate, disconnected decision, because that's precisely the blind spot the old system let slide — five overlapping "interest-free" plans from five different retailers can add up to a real monthly obligation that no single checkout screen ever shows you in full.
If something does go wrong — a faulty item, a retailer that's gone into administration, a provider that won't budge on a dispute — escalate to the Financial Ombudsman Service rather than accepting the first "no" from customer support. That route is free, it's new as of this July, and providers know a Section 75 or FOS complaint carries real weight now in a way it simply didn't a year ago.
One thing the new rules don't fix: BNPL still doesn't show up on your credit file the way a credit card does in every case, so it's still possible to be juggling several plans without a lender seeing the full picture. Regulation raised the floor. It didn't make the product risk-free.
BNPL versus a credit card, now that both are regulated
With Klarna and a credit card both sitting under FCA oversight, the honest comparison is finally apples to apples, and it still favours BNPL for short, disciplined use. A typical UK credit card charges somewhere around 25-30% APR if you carry a balance, while a standard Klarna Pay in 3 or Clearpay plan charges nothing at all provided you pay on time — the cost only appears if you miss a payment, and even then it's typically a flat late fee rather than compounding interest. For a £200 purchase paid off in six weeks, BNPL is almost always the cheaper route. For anything you're not confident you can clear within the plan's term, a 0% purchase credit card with a longer promotional window is usually the better choice, because missing one BNPL instalment can trigger the whole remaining balance becoming due immediately — most credit cards don't do that.
Where the two genuinely diverge is dispute protection on big-ticket items. Section 75 on a credit card has covered purchases between £100 and £30,000 for decades, with a well-worn process behind it. Section 75 on BNPL is brand new as of July, which means providers are still building the internal processes to handle claims quickly — early reports from consumer groups suggest response times are inconsistent while Klarna, Clearpay and PayPal scale up their complaints teams to match card issuers. Worth knowing before you rely on it for a £2,000 holiday booking.
A few questions worth asking before you tap "Pay in 3"
- Is this checkout option run by Klarna, Clearpay or PayPal — or is it the retailer's own scheme? Only the former carries the new FCA protections.
- Could you cover the full balance today if your income dropped next week? If the honest answer is no, a longer 0% credit card term is the safer structure.
- Do you already have two or three BNPL plans running elsewhere this month, even small ones? They rarely show up in one place, and August's back-to-school and holiday spending is exactly when they quietly stack up.
None of that means avoid BNPL. It means use it the way you'd use any other form of credit now that it legally is one — with an eye on the total, not just the instalment.