Plans to protect shoppers who use Buy Now, Pay Later put forward by the Government – though rules won't come in until 2026

Martin: "Do you use Buy Now, Pay Later? If you do, beware, because it is not regulated yet. Though we've had news out today that that is about to change. I'm Martin Lewis from MoneySavingExpert.com. Now, Buy Now, Pay Later has become near ubiquitous at online checkouts. You're given the option to spread the purchase over three months interest-free. It's almost sold and seen as a lifestyle choice, but it isn't.

"It is a debt. And it is the fastest growing form of major debt in the UK. No surprise. Now, many people, me included, have been campaigning for regulation to make sure that consumers are properly protected for a number of years. We thought it was going to happen with the last Government – because they said it would. They did all the consultations that were needed to get it going, and then suddenly… [Martin whistles.] Nothing. Tumbleweed. Silence.

"So I was very pleased today to get a call from Rachel Reeves, the new Chancellor, to tell me that they are going to start the process of regulating it. But with the consultations and things that are needed, it will not be coming in until January 2026. So right now, and this Christmas, there is no regulation in place.

"So I wanted to use this video to explain to you some of the pros and cons of actually using Buy Now, Pay Later. I’m not in principle against it at all. I mean, it's a form of debt, and if you need it for a planned, budgeted, one-off, necessary purchase, like you need a plumber, or you need your car to be repaired, then being able to spread the cost over three months with no interest whatsoever is very useful. And I know many people use it and have no problems.

"My concern is often the way it's marketed and what it's used for. Why do they have Buy Now, Pay Later on some takeaways? You should not be getting into debt to get yourself a takeaway. That is a slippery slope that can lead to a debt spiral. And the real problem with Buy Now, Pay Later is if it is used willy-nilly, because there are few affordability checks and people rack up multiple debts and multiple payments are needed at the same time.

"The result of that is it can lead to debt collectors and busted credit scores that can have an impact on you for years, including potentially stopping you getting a future mortgage. Now, there is data available from [charity] Citizens Advice from a report it did at the beginning of 2024 – so not that long ago – that almost a third (29%) of Buy Now, Pay Later users who were due to make a payment in a previous month borrowed money to repay their instalments, meaning the initial debt is only leading to more debt. That's quite worrying.

"And 67%, they had a 67% increase in the people seeking help from Citizens Advice due to Buy Now, Pay Later debt in 2023. Now, regulation should help that. It'll mean that the firms must make it plain that it's a debt and the consequences of not being able to repay it. The marketing must be clearer. The fairness rules that apply to other forms of debt must be put in place, and affordability checks must be put in place too.

"And, crucially, most important for me – the thing my campaigning focused on – is if you have a problem with a Buy Now, Pay Later company, you will have a right to go to the free Financial Ombudsman Service so that it can adjudicate and, if necessary, it can rule that they must put it right, whether that's fixing your credit file or whether that's giving you recompense.

"And that is a necessary right that these companies, whatever the debt is, all forms of debt, and especially with debt as well as other finance, because debt is so pernicious and dangerous if it goes wrong. But these companies have to obey fairness rules and the Consumer Duty that's in place if something goes wrong.

"But: right now it is not regulated. So it is very important that if you're going to get Buy Now, Pay Later debt now, you are wary and you think carefully if you need it. Because if something goes wrong and you're in dispute with one of those companies, there is nowhere you can escalate it to."