Consumers should be better protected as Buy Now Pay Later lenders now require authorisation to operate.

Shoppers using Buy Now Pay Later (BNPL) services have stronger rights but some will be refused loans, as new rules come into effect. From Wednesday, BNPL lenders must have regulator approval to operate, giving shoppers more access to refunds and independent rulings on unresolved complaints if things go wrong. Providers such as Klarna and Clearpay have become huge operators allowing consumers to pay in interest-free instalments, but campaigners have often described the wider sector as an unregulated Wild West. There are fears that new affordability checks on each BNPL transaction will leave some blocked for the first time, pushing them towards "thrilled" loan sharks instead. "While regulation is clearly needed and welcomed, our recent research found that nearly half of those likely to be rejected have not missed a BNPL payment," said Kate Pender, chief executive of not-for-profit Fair4All Finance, which promotes fair and accessible financial services. "The need for credit doesn't just disappear when you can't access it and people are often pushed towards more expensive or unregulated alternatives." "Klarna doesn't share these concerns because the new rules largely formalise what we already do: we run affordability checks, show costs upfront and report to credit reference agencies," a spokesman for the company said. "Like the [regulator], we expect the new regulation will ultimately lead to growth as it increases consumer trust and confidence."