MSE News

Buy now, pay later users may be able to take complaints to the Financial Ombudsman under new Government plans

Shoppers using buy now, pay later (BNPL) services may be able to take complaints to the Financial Ombudsman Service in future, as well as claim refunds using Section 75 protection, under new Government proposals. But while these changes are "vitally needed", founder Martin Lewis has warned that the Government must "pick up the pace" when it comes to taking action.

Plans to regulate the BNPL sector – something Martin and, alongside others, have campaigned for – were first announced in February.

This coincided with the publication of the 'Woolard Review', which warned that it would be relatively easy to accrue around £1,000 of debt using BNPL products that credit reference agencies and mainstream lenders could not see. The review also found that more than one in 10 customers of a major bank using BNPL services were already in arrears.

But while the Government says in its consultation published today that the evidence for detriment to consumers "remains limited", it has said it will investigate this further, as well as making a number of recommendations on how the regulated market could function – see below for more on this.

However, Martin has warned that the Government must now pick up the pace when it comes to taking action as firms' "free rein" will continue, unregulated, this Christmas. See our Buy now, pay later guide for more info on how it works and what to look out for. You can also read the consultation paper in full on The consultation closes on 6 January 2022, although it's unclear when a full response will follow.

'The Government needs to pick up the pace – more flesh on the bones is needed'

Martin Lewis, founder of, said: "Buy now, pay later (BNPL) has exploded as a form of payment in the UK over the last few years. Regulation is something I've long called for, and it's good to finally have proposals from the Government. Yet it really needs to pick up the pace, taking so long to do this has given these firms free rein to continue, unregulated, this Christmas.

"BNPL isn't automatically a bad thing to do. Done right, used right, it's interest-free, and can be a useful tool to help people spread costs. However, what's most telling is it is sold to retailers as an easy way to get people to spend more – this, combined with the fact it is most popular amongst younger adults is a big red flag. So it is vital to get this regulation right.

"The strongest parts of the proposal are those which suggest you will be able to take BNPL firms to the Financial Ombudsman if things go wrong – a crucial protection – and the possibility of extending the Section 75 protections that apply to credit cards to BNPL. These changes are vitally needed.

"However, I think more flesh on the bones is needed on the plans to tackle problems with the design and marketing of BNPL. These firms are slick, and their often irresponsible advertising, and tech push is a recipe for encouraging overspending and consumer harm."

BNPL customers may be covered by Section 75 protection in future – and be able to take complaints to the Financial Ombudsman

The Government's key propositions to regulate the BNPL market are that: 

  • BNPL users should be given the option to take complaints to the independent Financial Ombudsman Service. The Government says this would ensure "greater consumer protection" in the market given consumers don't currently have this option at present. 

  • Section 75 protection should apply. Under Section 75 of the Consumer Credit Act, your credit card provider is jointly liable if something goes wrong with goods purchased using your card that cost between £100 and £30,000. But while the Government says it is aware that some BNPL providers currently have their own buyer protection schemes, it believes statutory protection could apply as part of the regulation.

  • There needs to be more controls on BNPL advertising and promotions. While there are some existing requirements that BNPL firms have to follow, the Government has suggested that ALL BNPL firms should have their adverts approved by an 'authorised person', such as the Advertising Standards Authority or the Committees of Advertising Practice.

  • Creditworthiness assessments should be mandatory. There is currently no obligation for providers to conduct creditworthiness assessments before giving access to BNPL products. But the Government suggests this should be included within the regulation to help ensure customers do not take on debts they can't afford.

  • There should be rules to treat customers in financial difficulty fairly. While some BNPL firms do have rules in place that support customers in financial difficulty, the Government says there is no consistency across the board. So it's suggested this should be considered within the scope of regulation. Under current Financial Conduct Authority rules, firms must treat customers in financial difficulty with "forbearance and due consideration". Help offered, for example, might include reducing or suspending further interest or charges.

What does the Government say?

A Treasury spokesperson said: "Buy now, pay later can be a helpful way to manage your finances, so it's important that regulation is balanced and proportionate, ensuring that customers are given appropriate protections without unduly limiting the availability and cost of a useful financial product."

MSE weekly email

FREE weekly MoneySaving email

For all the latest deals, guides and loopholes simply sign up today – it's spam-free!