You've Never Missed a BNPL Payment. Today the FCA Decided £60 Is Too Much Trust for You.

The new affordability checks are mandatory, instant, and completely opaque. Each lender designs its own algorithm. There is no standardised model, no published criteria, and — crucially — no right of appeal for a declined transaction at point of sale.

Fair4All Finance estimates 10–30% of BNPL users will fail these checks. That's a range wide enough to drive a bus through: anywhere from 850,000 to 2.5 million people, depending on how conservative each lender's model turns out to be. Younger consumers and those with thin credit files are disproportionately affected — the very people BNPL was most useful for.

Here's the perversity: BNPL was popular partly because it didn't require the credit history that traditional lenders demand. An 18-year-old with a weekend job and no credit file could split a £60 purchase. A credit card would have declined them. Under the new rules, BNPL will decline them too. Where exactly are they supposed to go?

The FCA's position — that borrowers shouldn't access credit they "cannot realistically afford to repay" — sounds reasonable until you ask who decides what's realistic. If Klarna's algorithm says a £60 purchase over six weeks is unaffordable for someone earning £18,000 a year, Klarna's algorithm is making a moral judgment dressed as a mathematical one.

For the full list of what changed, see our breakdown of the new BNPL rules. The short version: FCA authorisation, Section 75 for purchases above £100, and mandatory affordability checks that each lender designs independently.

Under FCA consumer credit rules, authorised firms must assess creditworthiness before lending. The problem is that "creditworthiness" for a £60 purchase repaid over six weeks should not mean the same thing as it does for a £10,000 personal loan over five years. The FCA's one-size-fits-all approach ignores the difference.

Credit reference agency Experian tracked more than 100 million BNPL transactions in 2025. Of those, 98.5% of balances were repaid on time. Let that number sit for a moment: out of every 200 BNPL transactions, 197 were paid exactly as agreed. The default rate on UK credit cards, per UK Finance, runs at 1.5–2.5% — meaning BNPL actually performs better than the regulated product everyone holds up as the gold standard.

The 1.5% who don't repay on time are real people with real problems, and they deserve protection. But regulating an entire industry around the 1.5% while removing access for a much larger group of responsible users is a sledgehammer-to-crack-a-nut approach that the FCA would never apply to credit cards.

Klarna, the UK's largest BNPL provider, already runs affordability checks, shows costs upfront, and reports to credit reference agencies. A Klarna spokesman told the BBC the new rules "largely formalise what we already do." The difference is that Klarna's existing checks were designed to be inclusive — they wanted to approve responsible borrowers. The new regime incentivises conservatism: decline first, avoid regulatory risk, let the consumer figure out an alternative.

Compare this to the UK credit card market, where UK Finance data shows default rates of 1.5–2.5% consistently. BNPL, with its 98.5% on-time rate, is the safer product by the only metric that matters — and it's the one getting the regulatory sledgehammer.

The counterargument — that the 1.5% who struggle justify regulating the 98.5% who don't — is the logic of pre-emption, not evidence. If we applied the same standard to UK savings accounts, we'd ban fixed-rate bonds because some people withdraw early and pay penalties.

Section 75 protection on purchases above £100 is genuinely valuable — nobody disputes that. But the average BNPL transaction, per Experian, is about £60. Most BNPL purchases fall below the Section 75 threshold entirely.

For those below £100, some providers will maintain existing buyer protection policies. Klarna says its "buyer protection" will continue for sub-£100 transactions. But the new compliance burden — FCA authorisation fees, mandatory reporting, FOS case fees (£650 per complaint regardless of outcome), dedicated compliance staff — will fall disproportionately on smaller BNPL providers.

Ben Player, a partner at law firm TLT, warned that larger, FCA-authorised firms would absorb the compliance cost while smaller players "may struggle with the cost and complexity, prompting consolidation or even exits." The result: less competition, fewer choices, and three firms — Klarna, Clearpay, PayPal — with even more market power than they have today.

Regulation that entrenches incumbents and kills challengers is bad regulation, regardless of intention.

For consumers, the alternative is often a credit card with a 25%+ APR — or nothing at all. Our guide to the best UK savings accounts shows the gap: the top easy-access rate hovers around 4.5%, while the FOS case fee alone (£650) exceeds what many smaller BNPL providers earn on hundreds of transactions. The economics of compliance don't scale down.

The Financial Ombudsman Service charges firms £650 per complaint — win or lose. For a BNPL provider earning 3% on a £60 transaction (£1.80), a single FOS referral wipes out the revenue from 361 transactions. Smaller providers cannot absorb that risk.

The same consolidation dynamic played out in the UK investment platform market, where FCA regulation favoured scale and the Big Three now dominate. BNPL is heading for the same outcome — and consumers will have fewer choices, not more, when it's done.

This is the argument Fair4All Finance made, and it deserves to be taken seriously. When regulated credit becomes unavailable, people don't stop needing credit — they find unregulated alternatives. Pender warned that loan sharks would be "thrilled at the prospect" of 1.6 million newly excluded consumers.

The counterargument — that credit unions, 0% credit cards, and responsible lenders will fill the gap — assumes a functioning alternative credit market that doesn't exist for many of the people BNPL serves. Credit unions have eligibility requirements. 0% credit cards require good credit scores. Overdrafts come with APR north of 35% for unarranged borrowing.

BNPL was filling a genuine gap: small, short-term, interest-free credit for people who either couldn't or didn't want to use traditional products. Closing that gap without building a bridge is reckless.

The Treasury's own impact assessment should have modelled this substitution risk. If it did, the results haven't been published. What we know is that 1.6 million people just lost access to their cheapest form of credit overnight.

Building a proper emergency fund is the ideal solution — but telling someone who needs £60 today to save £1,000 first isn't advice, it's a punchline. BNPL existed because the gap between those two numbers is real, and for millions of people, it was the only bridge.

StepChange Debt Charity reports that the average client seeking help has £14,500 in unsecured debt spread across 5.2 different lenders. BNPL is rarely the only or even the primary source — but it's the one the FCA chose to regulate first. The substitution risk is real: close the cheapest credit channel, and the more expensive ones capture the flow.

Nobody is arguing for zero regulation. But there's a spectrum between "unregulated wild west" and "credit card rules applied wholesale to £60 transactions." A smarter approach:

Centralised affordability data. The real danger of BNPL was never a single £60 transaction — it was five concurrent agreements across different providers, invisible to each other. The FCA could have mandated a centralised BNPL database similar to the Credit Reference Agency framework without requiring full-blown affordability checks on every transaction. Know what someone already owes before lending more.

Proportionate checks. A £60 purchase split over six weeks does not need the same affordability assessment as a £10,000 personal loan. Tiered checking — light-touch for small amounts, full assessment above a threshold of say £200 — would protect consumers without blocking millions of responsible users.

Financial education, not exclusion. The FCA and Treasury could have required BNPL providers to fund financial education and debt advice proportionally — a levy on transaction volume — rather than making the product harder to access. The Money and Pensions Service already runs programmes that could be scaled with industry funding.

Instead, we got the bluntest possible instrument: regulate it like a credit card. Which means millions of people who used BNPL perfectly well will now use something worse, or nothing at all. The comfortable consensus got its headline. The 1.6 million people staring at a declined checkout screen didn't.

For the opposing view — that BNPL regulation is overdue consumer protection and that 98.5% repayment hides real harm at the margins — read the case for regulation in our debate on BNPL.

A Money and Pensions Service survey found that 11.5 million UK adults have less than £100 in savings. These are the people BNPL served — and these are the people the FCA just told to find another option.

If the FCA genuinely wanted to help the 1.5% of BNPL users who get into trouble, it could have mandated a centralised BNPL database — lenders checking total exposure before approving — rather than blanket affordability checks. The 0% balance transfer market already proves that regulated credit can work for consumers without excluding them. BNPL deserved the same approach.

Read the full debate: For the argument that BNPL regulation is overdue and that the industry's 'financial inclusion' defence doesn't hold up, see our companion article on why BNPL needed regulating. Two views, one question: did the FCA get this right?