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American Focus > Blog > Economy > UK to regulate buy now, pay later firms like Klarna and Affirm
Economy

UK to regulate buy now, pay later firms like Klarna and Affirm

Last updated: May 19, 2025 9:35 am
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UK to regulate buy now, pay later firms like Klarna and Affirm
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The “buy now, pay later” trend has been gaining popularity, with companies like Klarna and Block’s Afterpay offering consumers the option to defer payment for their purchases. However, concerns have been raised about the affordability of these services, leading the U.K. government to propose new regulations for the sector.

Fintech firms in the buy now, pay later space have been thriving by providing interest-free financing for a wide range of products, from fashion to food deliveries. The competitive landscape has seen the entry of U.S. player Affirm into the U.K. market, further intensifying the competition.

City Minister Emma Reynolds announced that the U.K. government is introducing new rules to bring more structure and accountability to the buy now, pay later sector. These measures aim to protect consumers from falling into debt traps and provide the industry with the certainty needed for growth and job creation.

Under the proposed regulations, buy now, pay later firms will be required to conduct upfront checks to ensure that customers can repay their loans. Additionally, consumers will have easier access to refunds, and complaints can be escalated to the Financial Ombudsman for resolution.

Both Klarna and Clearpay, the U.K. arm of Afterpay, have expressed support for the regulatory changes. They believe that clear rules and standards will create a more sustainable operating environment for the industry as it continues to expand as a popular payment option for consumers.

While buy now, pay later companies welcome regulation, there are concerns about outdated rules being applied to their innovative business models. The government has reassured that it will update the Consumer Credit Act to provide a modern framework that reflects the current borrowing trends.

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The new rules are expected to be implemented next year, giving buy now, pay later firms time to adjust to the regulatory changes. Overall, the aim is to strike a balance between consumer protection and fostering innovation in the financial technology sector.

TAGGED:AffirmBuyFirmsKlarnaPayregulate
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