The government is introducing new rules to regulate the fast-growing buy now, pay later sector, aiming to rein in what it described as a “wild west” of unsecured borrowing.
Under the legislation, due next year, lenders will be required to carry out affordability checks and offer consumers quicker refunds and the right to escalate complaints to the Financial Ombudsman.
Usage of buy now, pay later products has soared, with 11 million people using the service in the past year, according to the Financial Conduct Authority.
Critics say many shoppers do not fully understand they are taking on debt and risk overextending their finances.
Consumer groups welcomed the move, calling it a long-overdue step in protecting vulnerable borrowers. Major providers, including Klarna and Clearpay, said they support regulation and are working with the regulator.
The new rules are expected to improve transparency, reduce defaults and create a clearer framework for lenders and borrowers alike.