Buy-now pay-later loans face regulation in the future | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 02/02/2021
egg timer

Unregulated buy-now pay-later loans look set to be overseen by the financial watchdog the Financial Conduct Authority (FCA) following a series of recommendations made by the Woolard Review.

The FCA commissioned the review following a surge of consumers using buy-now pay-later schemes since the start of the Coronavirus pandemic. In 2020, lending under these schemes quadrupled to £2.7 billon pounds across 5 million people.

Across the UK in 2019 42.5 million people used consumer credit amassing nearly £250 billion of outstanding debt overall.

The review set out 26 recommendations to the FCA and these include:

Urgent regulation of buy now-pay later loans

Buy-now pay-later schemes have grown in popularity, with brands such as Klarna becoming more popular with younger people. These schemes allow consumers to buy goods from retailers and to then split their payments interest free. While this is a significant lower cost alternative to other forms of credit with interest, more than one in ten customers of a major bank using buy-now pay-later were already had outstanding debts. Placing this type of lending under regulation will help to make sure consumers are protected from becoming over indebted.

Funding for free debt advice

It is anticipated that demand for free debt advice will increase, with the review estimating this to reach 1.5 million cases following the pandemic. Those in severe financial difficulties will need financial support to pay fees for debt relief orders.

Support for those needing help during the Coronavirus recovery

Those needing financial support with their mortgages or other debts have been supported by lenders through payment holidays. The review encourages the FCA to make sure borrowers struggling due to Covid-19 receive consistent support from lenders by revising its rules and guidance as the pandemic evolves. 

Alternatives to high-cost credit loans

The review suggests that credit unions and Community Development Finance Institutions be reformed to help make a sustainable alternative to high-cost credit.
The regulator also recommends that in addition to making sure lending is affordable, that lenders focus on meeting the needs of their borrowers for the time they hold their product.

The FCA will publish its business plan in April 2021 and will then give further details of its response to the Woodall Review.

Charles Randell, Chair at the FCA, said:
"Unaffordable credit can damage the lives of people who are already struggling to manage everyday expenses. While we have made progress in reducing unaffordable debt in the years before coronavirus, the pandemic has had an unequal impact on households. Many people have been able to reduce their debts, but some of the poorest in our society have exhausted any savings or run up more debts. All the authorities which cover debt and debt advice must act together systematically to prevent problem debt and to help people get out of a spiral of debt through properly funded debt advice.
"Regulation should be consistent and the Review shows how we can ensure high standards in consumer credit regardless of the form of credit.
"The Review has powerful recommendations on debt advice and insolvency including on the IVA market. We are ready to work with other regulators to reduce the harm that IVAs can produce for people that use them, and to reduce the scope for unscrupulous operators to prey on vulnerable indebted people through for-profit debt packaging.
"As the market innovates and changes, regulators and legislators need to respond quickly and decisively to protect consumers by facilitating credit where it is beneficial and clamping down on it when it does harm. The FCA agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation."

Struggling with debt due to Coronavirus

Those struggling with debt due to Coronavirus may be able to get support through a Covid debt management plan, this initiative from the charity StepChange Debt Charity was launched last year and can help borrowers to reduce their repayments for a short period of up to 12-months. Read more about Covid debt management plans.

Borrowers that need longer term support with their debts should speak to Citizen Advice or a free debt charity.

How to find the best loan rates

Those wanting a loan can compare unsecured loan rates using our charts. Find out more about the different types of loans available.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

egg timer

Cookies will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy