Since 15 July 2026, UK buy-now-pay-later is regulated credit: ombudsman access, Section 75 refunds on purchases over £100, mandatory affordability checks, and missed instalments on your credit file for six years. What changed, and what it costs you.
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A direct comparison of features, rules, limits, and eligibility requirements.
| Feature / Detail | Regulated DPC (Post-July 15, 2026) | Unregulated BNPL (Pre-July 15, 2026) |
|---|---|---|
Legal status | FCA-regulated credit under the Deferred Payment Credit regime | Outside regulation: voluntary industry codes only |
Ombudsman access | Free escalation to the Financial Ombudsman Service after the provider's 8-week window | None: the provider's own customer service was the end of the road |
Section 75 refunds | Lender jointly liable for faulty or undelivered goods on single items £100-£30,000 | No joint liability: merchant collapse meant chasing administrators |
Affordability checks | Mandatory creditworthiness assessment before lending | Optional soft check, mostly identity verification |
Credit file impact | Payment history reported to Experian, Equifax and TransUnion: on-time and missed alike; defaults visible 6 years | Patchy voluntary reporting |
Late fees | Must be fair and proportionate under Consumer Duty (e.g. Klarna capped at £10 total per order) | Provider-set caps only (commonly up to 25% of order value) |
Analyze the advantages and drawbacks of each financial product before making a decision.
For a decade, UK buy-now-pay-later lived in a legal gap: interest-free credit under 12 months was exempt from the Consumer Credit Act, so Klarna, Clearpay and PayPal Pay in 3 operated outside FCA rules that bound every credit card. The Treasury closed that gap by creating a new regulated category — Deferred Payment Credit, with FCA authorisation mandatory from 15 July 2026.
Five protections arrived at once: FCA authorisation of providers, mandatory affordability checks before lending, Consumer Duty obligations (including forbearance when you're struggling), Section 75 joint liability on qualifying purchases, and free escalation to the Financial Ombudsman when a provider's answer doesn't satisfy you.
None of it is retroactive. An agreement from June 2026 keeps its old terms, no FOS, no Section 75, until it is paid off. If you carry balances from both eras, you hold two different legal products that happen to share an app.
Ellie orders a £600 sofa on Pay-in-3 and the retailer goes into administration before delivery. Under the old regime she was an unsecured creditor of a dead company: instalments still owed, sofa never coming, recovery odds near zero. That exact scenario filled complaint forums for years.
Under DPC, Section 75 of the Consumer Credit Act applies: for single items priced £100 to £30,000, the lender is jointly and severally liable with the merchant. Ellie claims against her BNPL provider, the outstanding instalments are cancelled, and paid ones are refunded. If the provider stalls past eight weeks or rejects unfairly, the Financial Ombudsman takes the case free of charge.
Mind the threshold mechanics: it is the single item's price that counts. A £600 sofa qualifies; a £120 basket of three £40 cushions does not. For purchases under £100, your route is the provider's own refund process: improved by Consumer Duty, but not statutory.
The old regime's dirty secret was invisibility: most BNPL activity never reached the credit bureaus, so neither did most missed payments. Regulation ends that both ways: DPC providers report payment history to Experian, Equifax and TransUnion, and an instalment 30+ days late lands on your file as a delinquency, visible to every mortgage and loan underwriter for six years.
Scale that against the money: on a £500 order, Klarna's late fees cap at £10 in total. The fee is trivial; the file entry is not. A £10 slip on trainers in 2026 can still be sitting in your mortgage application in 2032: a wildly asymmetric penalty that did not exist eighteen months ago.
Three habits fit the new rules: set autopay for every plan, since the downside moved from fees to file damage; keep paying instalments during a goods dispute and reclaim afterward, because stopping payment mid-dispute now marks your file; and if money is genuinely tight, tell the provider — Consumer Duty forbearance pauses fees and adverse reporting, but only once you ask.
One more shift worth watching at the checkout itself: affordability checks mean declines now happen. Providers must assess whether you can afford the instalments across all your visible credit, so stacking plans across Klarna, Clearpay and PayPal simultaneously, the classic pre-2026 pattern, will increasingly hit a wall. That is the system working as designed: the FCA's own research found BNPL users were twice as likely to also hold high-cost credit, and the checks exist to interrupt exactly that spiral before it compounds.
There is no consumer case for mourning the old regime: since 15 July 2026 every new BNPL agreement carries ombudsman access, Section 75 joint liability above £100, mandated affordability checks and hardship forbearance: protections that did not exist for the same product a month earlier. The cost is that BNPL is now real credit with real consequences: instalment history flows to all three credit reference agencies, and one payment 30+ days late follows you for six years, into mortgage applications that once never saw your Klarna habit. Two practical edges remain: agreements signed before 15 July 2026 stay under the old rules with no FOS route, and Section 75 needs a single item over £100: three £40 items in one basket do not qualify.
Everyone using BNPL from now on: by law. The winners are shoppers on £100+ items (full Section 75 cover) and disciplined payers building credit history.
Nobody going forward: it survives only in pre-July-2026 agreements, which keep their old, weaker terms.
The rules and figures on this page are researched from official primary sources:
