Buy now, pay later schemes are a modern take on traditional layaway payment options, with a few critical differences. That is, consumers receive the products immediately, while future payments are pending, and many of these plans do not charge interest. They thus have offered an appealing compromise for buyers and sellers: Customers gained a flexible way to buy on credit, without having to incur interest, and retailers accessed an easy way to increase sales and avoid the frustration (for both sellers and shoppers) of declined credit cards.

Yet the appeal may have been too great. Many enthusiastic buy now, pay later adopters got in over their heads. No longer constrained by credit limits that imposed controls on their spending, some shoppers entered into debt agreements that their income could not support. Even without being charged interest, the costs rose: If they enrolled in automatic repayment plans, they likely suffered bank overdraft fees. If they tried to control the repayments on their own, but failed, they could be hit by late fees from the lenders. Unfortunately, some consumers were surprised by such fees, because the description of when and how they would be imposed appeared within complex, lengthy loan agreements.

In response, the U.K. government assigned its Financial Conduct Authority to study the situation and offer suggestions. The Authority quickly moved to institute new regulations, which match those imposed on other forms of credit. For example, sellers must conduct mandatory credit checks prior to offering buy now, pay later plans as a purchase option. In addition, they are required to inform consumers of the fees and penalties up front, in clear and simple language. For consumers who believe they have been defrauded or treated unfairly, the Authority has created official channels for complaints as well, promising to subject the buy now, pay later companies to disciplinary action if necessary.

Such regulations arguably need to be part of a wider program of consumer education, seller ethical standards, and government oversight. Education systems might devote more attention to how debt accrues and the risks it creates. Sellers could be held to normative expectations that they present payment options clearly, then implement the plans fairly. And effective regulations should hold all parties accountable, to avoid situations in which consumers who cannot pay now find themselves even less able to pay later.

Discussion Questions

1. What are other rules might be put in place to curb harmful practices linked to buy now, pay later plans?
2. Should lending policies be regulated by individual customer responsibility, social norms, or government regulations?

Sources: Kate Hardcastle, “The Fine Print Era: Rethinking Retail Finance,” Forbes, July 18, 2025; Vicky Shaw, “The Big Change Coming to Buy Now, Pay Later Scheme,” The Independent, July 18, 2025; Yamini Kalia, “UK’s Financial Watchdog Proposes Protections for Buy Now, Pay Later Borrowers,” Reuters, July 18, 2025.