Buy Now, Pay Later and Your Consumer Rights: Refunds, Disputes and What Happens If a Retailer Goes Bust
Buy now, pay later splits the cost of a purchase, but your rights if something goes wrong depend on how the agreement is structured and who you complain to.
A different question from ‘how does BNPL work’
Most explainers on buy now, pay later (BNPL) focus on the mechanics: you buy something, split the cost into instalments, and pay later with no interest if you keep up. That is the easy part. The harder part, and the part that catches people out, is what happens when things go wrong. What if the item is faulty? What if the retailer goes into administration before you have finished paying? What if you want to dispute a payment? This piece looks at BNPL from the consumer rights angle, not the budgeting one.
Who you are actually dealing with
When you choose a BNPL option at checkout, you are not entering an agreement with the retailer. You are entering an agreement with a separate finance provider, such as Klarna, Clearpay or PayPal’s pay-later products, who pays the retailer upfront and then collects instalments from you. This matters because if there is a dispute, you may need to deal with two organisations: the retailer for the quality of the goods, and the BNPL provider for the payment agreement.
Faulty or undelivered goods
Under the Consumer Rights Act 2015, goods you buy in the UK must be of satisfactory quality, fit for purpose and as described, regardless of how you paid for them. If an item is faulty, your first point of contact is normally the retailer, exactly as it would be if you had paid by debit card. You can ask for a repair, replacement or refund depending on the circumstances.
The complication is what happens to your BNPL payments while a dispute is ongoing. Reputable BNPL providers will pause your instalments or refund you once a return is confirmed, but this does not always happen automatically or quickly. Keep evidence of returns, including tracking numbers and confirmation emails, and contact the BNPL provider directly if instalments are due before a refund has cleared. Do not assume the retailer sorting out your refund automatically stops the BNPL app from taking a scheduled payment.
Section 75 and BNPL: a key gap
One of the strongest protections in UK consumer credit is Section 75 of the Consumer Credit Act 1974, which makes your credit card provider jointly liable with the retailer if something goes wrong with a purchase over a certain value. This is a major reason people prefer paying by credit card for expensive items.
Many BNPL products, particularly the short-term, interest-free kind offered by third-party apps at checkout, have historically fallen outside this protection because of how they are structured and regulated. That is changing as regulation of the sector develops, so do not assume you have Section 75-style protection with a BNPL purchase unless you have checked the current rules for that specific product with the Financial Conduct Authority or MoneyHelper. Treat it as a genuinely separate question from your card protections, not an equivalent.
If the retailer goes bust
This is the scenario people worry about most, and reasonably so. If a retailer stops trading after you have used BNPL to buy something, you still owe the money to the BNPL provider, not the retailer, because that is who you have a credit agreement with. Whether you can get a refund for goods you never received, or a partial refund for goods you are returning, depends on the BNPL provider’s own policies and any protections that apply to that type of agreement.
This is different from a straightforward credit card purchase, where Section 75 can make the card provider liable even if the retailer has disappeared. With BNPL, always check the provider’s own terms on retailer insolvency before you rely on it for a big purchase, and consider whether a different payment method offers stronger protection for that specific item.
Disputing a payment
If you think a BNPL instalment has been taken incorrectly, in the wrong amount or after you cancelled an order, raise it with the BNPL provider’s customer service first and keep a written record. If you are not satisfied with the response, most regulated BNPL providers now fall under the remit of the Financial Ombudsman Service for complaints, though this depends on how the specific product is regulated. Check the provider’s own complaints page for the correct route, and escalate to the ombudsman if you get nowhere after giving them reasonable time to respond.
The credit file question
Missed BNPL payments can be reported to credit reference agencies, and this reporting has become more consistent across the sector over time. Because the reporting arrangements for individual providers can change, check the specific BNPL provider’s terms and the Money Helper website for up to date guidance before assuming a missed payment will or will not appear on your file.
The practical takeaway
BNPL purchases carry real consumer rights, but they are not identical to the protections you get with a credit card, and they depend heavily on the individual provider’s terms. Before using BNPL for anything expensive or from a retailer you are unsure about, check the provider’s refund and insolvency policies, keep records of every order and return, and know that the FCA and Financial Ombudsman Service are there if a dispute cannot be resolved directly.
Where to check current rules
BNPL regulation is an active area of change, so always verify the current position rather than relying on general knowledge.