BNPL regulation due to come into effect

Buy now pay later (BNPL) regulation is due to come into effect in July 2026, according to Which?, which reports that shoppers should then get access to Section 75 protection and recourse to the Ombudsman¹. BNPL is currently unregulated¹.

Section 75 of the Consumer Credit Act makes the card provider jointly liable with the retailer for purchases between £100 and £30,000¹. Shoppers using BNPL do not currently have that cover, as they would when using a credit card, and cannot take complaints about flexible payment purchases to the Financial Ombudsman Service¹. Klarna has previously told Which? that its purchases come with Klarna's Buyer Protection and that it has introduced an internal complaints adjudicator as an interim step until its customers can access the Financial Ombudsman Service¹.

The change sits alongside Klarna's own UK expansion. The Swedish BNPL provider launched its first UK debit card on 30 October 2025, alongside a membership rewards scheme¹. The card works with Klarna balance, a digital wallet that lets customers store e-money, add or withdraw funds and earn cashback on certain Klarna purchases¹. By default it functions as a debit card; customers wanting to spread payments can apply for a plan such as Pay in 3, which splits purchases into three interest-free instalments, with credit granted case by case after an eligibility check¹. There are no foreign exchange fees when spending abroad or in other currencies¹. Customers receive a virtual card by default and need a membership to get a physical one¹.

Membership tiers run from £1.99 to £44.99 a month¹:

In July, Klarna was authorised to act as an electronic money institution (EMI)¹. Money held with EMIs is not covered by the Financial Services Compensation Scheme, which protects up to £85,000 if a bank fails; e-money firms must instead hold funds in a safeguarding account or insurance policy¹. Safeguarding is provided by the EMI itself rather than an independent body, so it may take longer to get money back if the firm fails, and some costs could be taken by the administrator¹. Chargeback applies to purchases made using the Klarna card¹. As an EMI, Klarna customers can take complaints about Klarna balance or debit card functionality to the Financial Ombudsman Service¹.

Why it matters for households

BNPL is a form of credit, and missed payments can lead to late fees, a damaged credit score and, in some cases, referral to a debt collection agency¹. Until the rules take effect, purchases made through flexible payment options sit outside the Ombudsman's remit and outside Section 75, so a dispute over faulty or misdescribed goods bought that way rests on the provider's own complaints process rather than a statutory route¹. From July 2026, that position is due to change for BNPL purchases¹.

The distinction also matters for the Klarna card itself. Debit card and Klarna balance complaints already fall within the Ombudsman's scope because of the EMI authorisation, but the credit options attached to the card do not, and money held in the Klarna balance does not carry Financial Services Compensation Scheme cover¹. The membership fees of £1.99 to £44.99 a month are recurring charges, and Which? notes that whether membership is worth it depends on how many of the benefits are used¹.

What happens next

The regulation is due to come into effect in July 2026¹. No further dates for implementation have been reported.