Martin Lewis and his team of money-saving experts have issued a new warning to people using Buy Now, Pay Later (BNPL) services such as Klarna.

Releasing the advice in his latest MSE newsletter this week (October 22), Lewis asked his readers to “be careful” when it came to using the purchase option at checkout.

Millions of people use Klarna and Clearpay across the UK, with the payment method becoming increasingly common at major retailers and even takeaway shops.

Several options are usually available, including buy now, pay in 30 days, or split the cost into three equal monthly segments. Some deals allow you to pay within 12 months, depending on the service used and the retailer you buy from.

But in his newsletter, Lewis informed people of the impending changes to BNPL systems and warned against using them in the meantime, before the changes take effect.

Directing people to an MSE article on the subject, Lewis wrote: “Are you using Buy Now, Pay Later? Please note, this is not (yet!) regulated. This must change now, but not before 2026.”

Klarna is a popular BNPL service (Omar Marques/SOPA Images/LightRocket via Getty Images)

Using BNPL can be dangerous if you can’t manage repayments (Getty Stock Images)

Warning Buy now, pay later

With buy now, pay later a completely normalized way of purchasing in 2024, the MSE team warned about its use and mistakes.

“Millions of people use Buy Now, Pay Later companies, such as Klarna and Clearpay, when shopping online or in-store,” they wrote.

“Managed correctly, they can be a quick and inexpensive way to access credit.

“But research shows that many users don’t know that if something goes wrong, you face late fees and, increasingly, marks on your credit report.”

Marks on your credit report indicate that you have bad credit, which is when you have difficulty paying for services, such as clothes, a car, a phone contract or something similar. important than a mortgage.

This may mean you may struggle to borrow money in the future for products that require a financial agreement, such as upgrading your iPhone or Samsung Galaxy phone.

Not making your BNPL repayments can lead to poor credit scores (Getty Stock Images)

What’s changing with the Buy Now, Pay Later rules?

As it stands, the rules surrounding BNPL are not the same as when you enter into a standard credit agreement. But this is changing.

Four key changes have been proposed by the government to how BNPL should evolve.

Once the rules come into force in 2026, BNPL plan providers will have to provide “clear and accessible information on the risks involved”.

“This should allow you to make fully informed decisions before using BNPL services,” says the MSE team.

Affordability checks will also need to be carried out on those looking to use BNPL in the same way your credit will be checked for renting a car with finance.

There will also be so-called Section 75 protection on goods purchased with BNPL services.

MSE explains: “This would apply to items costing more than £100 but not more than £30,000, as is currently the case for credit cards. This means that the BNPL provider will be jointly and severally liable with the retailer in the event problem.”

Finally, those using BNPL can refer their concerns to the Financial Ombudsman Service if they are unhappy with the experience or treatment they received during their shopping experience.

Your affordability will soon be checked when you use BNPL, just as you would when taking a car on finance (Getty Stock Photo)

“It’s a parody”

Martin Lewis says it’s a “travesty” that BNPL never had these proper regulations.

“Buy now, pay later is now ubiquitous in online checkouts, so the fact that it has never been regulated is a travesty that I and others have long campaigned for. The last chancellor promised to regulate, then the tumbleweed rolled away as it fell silent, so I’m delighted that the new government has quickly restarted the process,” he said.

“BNPL can be useful, allowing those who need to spread out payments for a necessary and budgeted purchase, like a plumber, to do so interest-free. Yet it has been sold as a lifestyle choice, not as debt, and pushed into knee-jerk purchases or even takeaways. Too many people are struggling with multiple BNPL repayments, leading to debt enforcement and damage to credit reports.

“Regulation will mean businesses will have to openly declare it is debt, have appropriate rules around affordability and, crucially, allow people to go to the ombudsman if things go wrong .Still, that won’t happen until 2026, so people should still be very careful until then.”