The regulation of Buy Now Pay Later (BNPL) is a necessary step forward. The changes, brought into effect in July, mean that BNPL products are now regulated by the Financial Conduct Authority (FCA), and BNPL providers will need to provide certain information and support their customers in ways that may not have been standardised before.
Under the new rules, providers must complete affordability checks before offering credit, meaning no one should be borrowing what they cannot realistically afford to repay. As a result, some consumers will no longer be eligible to access BNPL products.
Many people we speak to are unaware that BNPL is a form of credit, or of the consequences that can follow if repayments are missed. Greater transparency, affordability checks and clearer consumer protections should improve outcomes and help people make more informed decisions.
However, this development also raises concerns about the impact on consumers who rely on this form of credit. Many use BNPL to manage cost-of-living pressures, navigate the current economic environment, and maintain their standard of living. In many cases, this includes funding everyday expenses such as food takeaways and clothing, as well as discretionary purchases such as holidays and other luxuries. Our data found that 62% of consumers who had used BNPL had done so for items such as washing machines, laptops, dishwashers and televisions. These are not necessarily impulse purchases, and in many cases, are fundamental items that support work, education and day-to-day life.
While tighter regulation will not directly cause an increase in the use of alternative borrowing, the reasons people fall into financial difficulty are complex and rarely driven by a single factor. Therefore, it would be naïve to ignore the risk that some consumers who are no longer able to access BNPL may look elsewhere for credit, particularly if they are already struggling with rising living costs and limited financial resilience.
The increase in BNPL usage in the last five years
BNPL has become far more embedded in how financially stretched households manage their finances. Among PayPlan customers, BNPL usage has increased by 3,793% since 2020. The average number of BNPL accounts held has risen from 1.25 to 1.91 over the same period, suggesting that for some consumers, these products are becoming a routine part of managing cash flow rather than an occasional borrowing option.
Our data also points to an emergence of a smaller cohort holding multiple BNPL accounts. While two thirds of users have a single account, around one in seven hold three or more, and 6% have five or more active accounts.
This matters because it highlights how some households are relying on multiple forms of credit simultaneously to bridge gaps in their finances. For those consumers, a failed affordability assessment may not simply mean delaying a discretionary purchase. It could mean losing access to a financial tool they have come to depend on to spread the cost of essential goods and unexpected expenses.
Millennials represent the largest share of BNPL users among customers, accounting for 54% of all disclosed BNPL usage, compared with 28% for Generation X and 12% for Generation Z. The data also shows that men account for a slightly higher proportion of BNPL accounts than women, at 51% compared with 41%, while the remainder are ‘undisclosed’.
Unintended risks of new regulation
Our frontline advisers regularly see the difficult choices people face when budgets are stretched to the limit. When a fridge breaks, a washing machine fails or an unexpected expense arises, families still need solutions. If mainstream and regulated forms of borrowing become unavailable, some may turn to less suitable alternatives. That could include high-cost credit products, informal borrowing arrangements, or, in the most concerning cases, illegal money lenders.
This is not a theoretical concern, and our data shows that 2025 recorded the highest level of loan shark borrowing disclosures on record.
Although, overall volumes remain low and disclosure itself can be difficult because of the stigma and fear often associated with illegal lending.
Importantly, we are not suggesting that BNPL regulation will drive people towards loan sharks. The evidence does not support such a direct causal link. Rather, our concern is that some of the underlying financial pressures which have fuelled the growth of BNPL remain firmly in place. If consumers still need access to credit for essential spending but find regulated options harder to obtain, there is a risk that a minority may seek alternatives that leave them worse off.
That is why regulation must be accompanied by broader support. Consumer education will be critical, particularly given that 85% of consumers we surveyed were unaware the new rules were being introduced. The debt advice sector, regulators, lenders and policymakers all have a role to play in helping consumers understand their options and access support before financial difficulties escalate.
Welcoming new regulation with the right support
The Financial Conduct Authority’s (FCA’s) objective is rightly to reduce harm while ensuring consumers can continue to access deferred payment credit where appropriate – which we welcome.
Regulating BNPL is the right thing to do, but as these changes bed in, we must continue monitoring the experiences of financially vulnerable consumers and remain alert to the possibility of unintended consequences. Consumer protection should not end at the point where credit is declined. It must extend to ensuring there are safe, affordable alternatives and robust support available for those who need it most.
As the new rules come into force, it is vital that regulators, lenders and the debt advice sector work together to ensure consumers continue to have access to safe, affordable credit. We encourage consumers to familiarise themselves with the changes and seek free debt advice if they are struggling to manage repayments across multiple credit products.
Rachel Duffey, CEO, PayPlan
