The UK government is poised to bring buy-now-pay-later (BNPL) firms such as Klarna and Clearpay under the Financial Conduct Authority's (FCA) regulation.
According to a CityAM report, new rules will require BNPL companies to assess consumers' creditworthiness and ensure that loans are genuinely affordable.
Consumers will also be able to escalate disputes with BNPL firms to the Financial Ombudsman Service.
Klarna obtained authorisation from the FCA to offer regulated credit and payment services in the UK last year, but this does not cover its BNPL products.
Campaigners have warned that BNPL services encourage vulnerable customers to take on unsustainable amounts of debt.
Earlier this year, Apple scrapped its ‘Apple Pay Later BNPL product less than a year after its launch.
According to the CityAm report, new BNPL rules will come into effect in early 2026.