In 2026, the UK will legislate to strictly regulate "buy now, pay later" loan agencies, which will be required to verify the borrower's ability to repay.

The British government announced that it will implement comprehensive regulatory upgrades for the "Buy Now Pay Later" (BNPL) industry starting next year, in order to align regulatory standards in this field with other consumer credit products. According to the latest statement from the Treasury, the related legislative proposal will be formally submitted to Parliament for review this Monday, aiming to fill industry regulatory gaps through systematic rules. It is understood that the new regulations clearly require BNPL lenders to fulfill two major obligations before issuing loans. On one hand, they must conduct mandatory debt repayment capacity reviews, with top platforms such as Klarna and Clearpay using credit assessments, income verification, and other means to confirm that consumers have repayment ability, in order to curb excessive borrowing risks from the source. On the other hand, they need to improve consumer recourse mechanisms, allowing borrowers to lodge complaints with the Financial Ombudsman Service when disputes arise and have access to an expedited refund process. In addition, a unified regulatory timeline has also been established, with all provisions set to take effect in 2026 to ensure a smooth industry transition. British Treasury Minister Emma Reynolds emphasized that this reform "will strengthen the consumer protection net and prevent people from falling into debt traps due to convenient payments." The background to this policy is the explosive growth of the BNPL industry in recent years services promoting "interest-free installments" have penetrated the UK retail market, but their business models lacking careful oversight have sparked widespread controversy. The implementation of this policy did not happen overnight. The previous Conservative government in the UK has been conducting ongoing reviews of the BNPL industry since 2021, with a focus on top platforms such as Klarna, Clearpay, PayPal, and Zilch Technology. These companies have partnered with retailers like ASOS and Boots to embed the "shop now, pay later" model in the e-commerce checkout process, leading to a surge in transactions during the pandemic. However, the rapid expansion of the industry has also exposed risks: some consumers, due to lack of financial planning, have accumulated debts on multiple platforms, and the existing regulatory framework only covers traditional credit products and cannot effectively constrain BNPL institutions. Market analysts believe that the new regulations will reshape the competitive landscape of the BNPL industry. On one hand, smaller institutions may exit the market due to rising compliance costs; on the other hand, top companies are starting to proactively adjust their risk management systems, evaluating debt repayment capacity while protecting user privacy. In the long run, stricter regulations may push the industry towards a "responsible lending" model, leading to a more fair market competition with banks, credit card companies, and consumer finance companies.