Shoppers who pay with regulated buy-now-pay-later credit can now lean on Section 75 of the Consumer Credit Act when a retailer refuses a refund, putting Klarna and other deferred-payment lenders on the same complaint ladder as card issuers for agreements signed after 15 July.
The shift is easy to miss because checkout buttons still look frictionless. Under the surface, deferred payment credit is no longer an exempt product: lenders need Financial Conduct Authority authorisation or a temporary permission, must run affordability checks, and must spell out repayments before customers commit. For many households, the more tangible change is chargeback-style protection when a £400 sofa never arrives or a festival ticket vendor collapses.
What Section 75 adds at the till
Section 75 makes the lender jointly liable with the merchant for breaches of contract or misrepresentation on purchases between £100 and £30,000. The FCA’s consumer guidance confirms that protection now applies to regulated deferred payment credit, mirroring credit card purchases. That means a shopper can pursue the finance firm—not only the shop—when goods are faulty or absent.
Providers must also route complaints to the Financial Ombudsman Service when internal disputes stall. HM Treasury pitched the reform as closing a fairness gap: millions used BNPL during the unregulated years without the dispute toolkit cardholders expect. From October, marketing teams can still advertise instalments, but compliance teams must document how refunds flow when merchants fail.
Affordability and the missed-payment letters
Regulation is not only about refunds. Lenders must contact borrowers quickly after missed payments under CONC 7.20, explaining what is due and what happens next. Affordability assessments before new agreements are designed to stop unmanageable stacks of instalments across multiple apps—a pattern debt charities highlighted when BNPL sat outside FCA perimeter.
Temporary permission registrants can still lend, but they must follow conduct rules on new business. Firms that never secured permission cannot open fresh deferred-payment plans; they may only service legacy exempt contracts. For consumers, the practical test is the checkout date: post-July plans carry the new protections, older plans do not.
How to use the rights without surprises
Keep receipts and the credit agreement reference. If a merchant ghosts you, notify the lender in writing with order numbers and delivery dates. Section 75 is powerful but not instant—cases turn on whether the finance contract genuinely funded the purchase and whether the claim fits the statutory thresholds.
For Klarna users, the regulatory change turns a convenience product into a regulated credit line with teeth. That is the point ministers advertised in July; four months in, the chargeback lever is live even if the pink button still says “Pay in three.”
Merchant and lender responsibilities
Retailers still handle returns first; Section 75 kicks in when merchants stall. Klarna’s terms now sit inside regulated credit agreements, so customer service scripts must route product disputes to the correct legal entity. Shops that white-label BNPL at checkout may not realise the finance partner is jointly liable—training gaps cause delays.
Debt advisers welcome affordability rules but warn that multiple small plans can still stack across providers. The FCA’s perimeter now covers deferred payment credit, not every instalment product marketed as “pay later.” Read the fine print on agreements signed after regulation day.