Guest blog: New debt regulation could have unintended consequences

Buy Now Pay Later (BNPL) has become part of everyday life for many people in Scotland, but most people don’t even realise they are using credit, they just see it as buying things with Klarna, ClearPay or Zilch. It is estimated that over 1/3 of people use BNPL and we know it’s much higher than this in low-income households.

BNPL helps people to spread the cost of clothes, white goods, presents or even summer days out with the kids at 0% interest. For some people, it is a choice. For others, it has become an integral part of budgeting and a way to spread the cost of the food shopping. Many families will also be relying on it to spread the increased costs that comes with the school holidays like days out, increased food bills and back to school purchases.

15th July – regulation day

From 15 July 2026, BNPL will be regulated by the FCA. It will mean:

• Clearer information for people at point of sale
• Affordability checks before BNPL is issued
• Better support when people are struggling with the repayments
• Stronger consumer protection

The affordability checks are really important. No one should be able to take on credit they cannot afford just to keep the process quick and easy.

However, our big concern is what happens to people who currently rely on BNPL and won't pass the new affordability checks. The checks are likely to be based on credit scores, rather than based on a customer's true affordability. Suddenly, people could find themselves not being able to spread the cost of things that help smooth their budget. This could lead to short term financial distress and inability to pay essential bills.

Regulation is needed but there could be severe short-term consequences that will increase financial distress.

The unintended consequences

The people affected may be your tenants, customers or service users. They may be using BNPL because they have limited access to mainstream credit, have had an unexpected bill or they have low or irregular income. They may have a low credit score because they have had some bumps in the road and find themselves without access to BNPL due to their credit score when the new rules come in, rather than their true affordability to repay.

A decline would be the right outcome if the credit is unaffordable, but it does not remove the need that led them there in the first place. The washing machine is still broken. The children still need new school uniforms and expect some days out. The energy bill or food shop still needs paid. A real danger is that people start borrowing from friends and family who are also struggling, or a credit card that costs more. It could mean missing priority bills. In the worst case, it could mean turning to illegal money lenders.

What can we do?

At Moneyline, we have been raising awareness with our customers to make them aware that they may not have access to BNPL going forward, so they can start planning ahead. Proactively raising awareness is key as few people seem to know about the change or what it might mean for them.

People also need safe options if they are declined for BNPL. That could include budgeting help, signposting to affordable credit or advice.

At Moneyline, we know that credit is not always the answer. But we also know that safe, fair and affordable credit can be a financial lifeline when people have nowhere else to turn. The challenge is making sure that the regulation does not simply close one door without opening another just because someone has a low credit score, rather than their actual affordability.

Ask yourself these three questions to help prepare your organisation:

• Do we know what are our customers are using BNPL for?
• What happens if they can no longer access it?
• Where can we signpost them to for support before they reach crisis point?

The regulation of BNPL will improve consumer protection and that is a good thing. But we must not ignore the short-term impact on people who have come to rely on it.