The UK’s Buy Now, Pay Later rules came into force this month, bringing deferred payment credit under the FCA for the first time and setting expectations on affordability, disclosure and access to the Financial Ombudsman.
Neil Kadagathur, founder of the consumer lender Creditspring, has argued for stronger credit protections for years. In this written Q&A he sets out what the rules change, where he thinks they fall short, and where UK consumer credit goes next.
The UK’s Buy Now, Pay Later regulations are now in force. What do they actually change for consumers, and what do they leave unchanged?
The new rules are an important milestone because they bring Buy Now, Pay Later into the same regulatory framework that applies to many other forms of consumer credit. For consumers, that means greater transparency, clearer information before taking out credit and stronger protections if something goes wrong. It also creates more consistent expectations around affordability and gives the FCA greater oversight of the sector.
However, it is important to recognise that this is the beginning rather than the end of the journey. Merchant-provided credit remains outside the scope of the regulations, meaning consumers could still receive different levels of protection depending on how credit is offered. The practical implementation of affordability checks will also be critical. If firms implement the rules differently, or if enforcement is not consistent across the market, we could continue to see inconsistent consumer outcomes. Regulation should create confidence, but that confidence ultimately depends on consistent application across the market.
You have long argued for stronger consumer protections in credit. Where do the new rules fall short of what you would have wanted?
The biggest challenge is ensuring that regulation creates a genuinely level playing field. The new rules are a welcome step forward, but there are still areas where consumers may experience different protections depending on the type of product or provider they are using. Good consumer outcomes should not depend on those distinctions.
I would also like to see more attention given to consumer understanding. Our research at Creditspring found that around 12 million adults with credit products do not feel confident they understand concepts like APR or credit scores. More strikingly, only 11 per cent could correctly calculate the total amount repayable on a 1,000 pound loan at 79.5 per cent APR. That suggests disclosure alone is not always enough. If people do not fully understand the products they are using, regulation can only go so far. Alongside stronger rules, we need clearer communication that helps people make informed financial decisions with confidence.
How should affordability checks work in practice for small, short-term credit products, and can lenders deliver them without shutting out the customers who need credit most?
Affordability checks should be proportionate, consistent and centred on whether borrowing is genuinely sustainable for the individual. The objective should not be to eliminate access to credit altogether, but to ensure people can borrow in a way that supports rather than undermines their financial wellbeing.
Technology gives lenders much better tools than ever before to assess affordability quickly and responsibly, using real-time data and a more complete picture of someone's financial circumstances. That means firms can make informed lending decisions without creating unnecessary friction for customers.
The key is striking the right balance. If checks are too light, consumers risk being offered credit they cannot comfortably repay. If they are too restrictive, people may be pushed towards less suitable alternatives. Responsible lending means making credit available where it is affordable, while declining applications where it clearly is not.
What gaps in the regulatory framework worry you most, and how do you expect firms to behave around them?
The biggest risk is inconsistency. Where regulation leaves room for interpretation, there is always the possibility that firms will take different approaches to affordability, disclosures or customer communications. That can lead to consumers receiving very different experiences despite using products that appear similar.
The market will also continue to evolve. New products, new technology and changing consumer behaviour mean regulation needs to remain flexible and adapt over time rather than becoming static.
One area that deserves continued attention is how information is presented to consumers. If disclosures do not genuinely improve understanding, then they are not delivering their intended purpose. The FCA’s current review of consumer credit disclosures is therefore an important opportunity to consider whether existing approaches, including APR, remain the most effective way of helping people understand the products they are using. Better consumer understanding should sit alongside strong regulation, not be seen as separate from it.
What does responsible lending look like at Creditspring, and what can the wider market learn from it?
Responsible lending starts with designing products around good consumer outcomes rather than simply maximising borrowing. At Creditspring, we have always believed credit should be transparent, predictable and easy to understand. That is why we have built our model around fixed membership fees rather than interest charges that can vary or compound over time.
Just as importantly, responsible lending means saying no when borrowing is not affordable. Assessing affordability properly is not a regulatory exercise; it is a fundamental part of treating customers fairly.
The wider industry has made significant progress over the past decade, but there is still an opportunity to build greater trust by focusing on simplicity, transparency and long-term financial resilience. Credit has an important role to play in helping households manage unexpected costs, but it should always leave people in a stronger position rather than creating a cycle of repeat borrowing.
Where does UK consumer credit go from here, over the next two or three years?
I think we will see three major themes. First, regulation will continue to evolve as the FCA reviews how consumer credit works in practice and responds to new products entering the market. Secondly, technology and better data will enable more accurate affordability assessments and more personalised lending decisions.
Finally, I hope we will see greater emphasis on financial resilience. Too many households still rely on short-term credit for everyday costs, pointing to deeper issues with savings and financial stability. There is also a role for better financial education, particularly helping people understand credit products and terminology properly so they can use credit more effectively without their debt spiralling. Credit should remain an important tool, but it should not become a substitute for resilience.
The firms that succeed over the next few years will be those that combine innovation with trust. Consumers increasingly expect products that are transparent, straightforward and designed around their long-term interests. Building confidence in consumer credit will not come from regulation alone, it will come from consistently delivering better outcomes for customers.
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