Everything you need to know about new rules affecting Klarna and Clearpay

Need to know

The new rules mean that more people could be refused credit though Buy Now, Pay Later.

Everything you need to know:

• New rules from the Financial Conduct Authority (FCA) are now in effect to protect millions of Buy Now, Pay Later (BNPL) users. These regulations aim to reduce the risk of shoppers accumulating unmanageable debt.
• The entire BNPL sector is officially under FCA regulation as of today. Firms offering these agreements now have a six-month window to apply for full authorisation from the regulator.
• Providers must now conduct proportionate credit and affordability checks before approving every single purchase. This means some shoppers might be denied credit if lenders fear they cannot afford the repayments.
• Customers will receive clear, upfront information regarding their payment schedules and the consequences of missed instalments. While usually interest-free, missed payments can still incur late fees and negatively impact credit scores.
• Lenders are now required to offer greater support to individuals who find themselves facing financial difficulty. This mandatory assistance includes directing struggling borrowers toward free, independent debt advice services.
• Shoppers who feel they have been treated unfairly can now escalate their complaints to the Financial Ombudsman Service. However, this new avenue for dispute resolution only applies to agreements made from today onward, not past purchases.
• Consumers will also newly benefit from Section 75 protection for purchases ranging between £100 and £30,000. This legally makes the BNPL lender jointly responsible with the retailer if an item is faulty or never arrives.
• Major providers like Klarna and Clearpay have publicly welcomed these stricter operating standards. Both the firms and the FCA agree that this framework will protect vulnerable consumers while allowing the credit sector to grow safely.

For all the latest news, visit the Belfast Live homepage here and sign up to our daily newsletter here.