After years of rapid, unregulated growth, the Buy Now Pay Later (BNPL) sector is finally being brought fully under the remit of the Financial Conduct Authority (FCA). This month marks the beginning of a strict new regulatory regime for providers like Klarna, Clearpay, and Laybuy.
Mandatory Credit Reporting
The most significant change for consumers is that BNPL providers will now be mandated to report comprehensive data to the UK credit reference agencies. Previously, many BNPL transactions were invisible to other lenders unless the consumer defaulted.
Now, both positive repayment history and missed payments will appear on your Experian, Equifax, and TransUnion files in real-time. While this offers a way for young consumers to build a credit history, it also means that a missed £20 payment for a pair of trainers will now actively damage your credit score.
Strict Affordability Checks
Providers can no longer rely on 'soft' credit checks alone. They must implement robust affordability assessments before approving a BNPL transaction. This means consumers who are already heavily indebted will find themselves blocked at the checkout.
Mortgage lenders are also welcoming the move, as it gives them a clearer picture of an applicant's true monthly outgoings. If you are planning to apply for a mortgage, clear all BNPL balances immediately, as underwriters view heavy reliance on these services as a sign of financial stress.