The Financial Conduct Authority (FCA) recently issued new regulatory proposals for Buy Now, Pay Later (BNPL) products. These measures, set to take effect when BNPL enters the FCA’s remit in 2026, aim to ensure that BNPL consumers receive the same level of protection afforded to other credit borrowers.
Affordability checks & lending criteria
Under the new framework, BNPL providers will be required to assess borrowers’ ability to repay. This mirrors obligations already in place for traditional credit products and forms part of the FCA’s broader commitment to consumer protection.
Enhanced support for vulnerable borrowers
In cases where consumers encounter financial difficulty, lenders must offer appropriate support. This includes earlier interventions and tailored support mechanisms, aligning with the FCA’s evolving approach to treating financially vulnerable customers fairly.
Access to complaints resolution
From regulation start, BNPL borrowers will also be able to escalate unresolved disputes to the Financial Ombudsman Service (FOS), providing an important external channel for recourse.
Minimal new regulation, leveraging existing frameworks
Rather than introducing wholesale new rules, the FCA plans to extend existing regulatory provisions, such as the Consumer Duty and the broader Consumer Credit Sourcebook, to BNPL products. The FCA believe this approach encourages compliance while supporting innovation within the sector.
Scope & implementation timeline
These reforms apply to what the FCA labels Deferred Payment Credit (DPC) interest‑free credit repaid within 12 months through instalments, typically offered by third‑party lenders rather than retailers directly. The Government has mandated that DPC come under FCA oversight starting 15th July 2026.
Following a consultation published on 18th July 2025, firms have until 26th September 2025, to provide feedback. The FCA will evaluate responses and publish its final rules in early 2026. Firms should prepare now, ensuring they have the correct authorisations or are ready to enter the Temporary Permissions Regime (TPR) if needed.
Consumer impact & footprint
BNPL has seen explosive growth, with 20% of UK adults (approximately 10.9 million) using it in the 12 months to May 2024. This is up sharply from 17% in 2022. While the product offers flexibility and simplicity, the FCA acknowledges intrinsic risks, including overextension of credit and potential harm to consumers without proper protections.
Key takeaways
Firms should:
- Review current affordability frameworks and adapt them for BNPL products.
- Ensure support protocols for borrowers in financial distress align with FCA expectations.
- Follow the consultation process and prepare for likely rule implementation in mid‑2026.
By proactively aligning with these forthcoming protections, firms can both remain compliant and maintain consumer trust as the BNPL market matures.
