The Financial Conduct Authority (FCA) has published its final policy on bringing the previously unregulated Buy Now Pay Later (BNPL) market into the regulatory fold. This move represents one of the most significant changes in the UK consumer credit landscape in recent years with important implications for both lenders and borrowers.
Under the FCA’s Policy Statement PS26/1, Deferred Payment Credit (DPC) the legal term for BNPL products that allow consumers to spread the cost of purchases into interest-free instalments over 12 months or less will become regulated credit from 15th of July 2026. Presently, many DPC agreements sit outside the FCA’s consumer credit rules.
What the Regulation Means for Consumers
From July 2026, firms offering DPC will need to be authorised by the FCA or operate under the Temporary Permissions Regime (TPR) if they are not yet fully authorised. This ensures that consumers are protected by a suite of regulatory standards similar to those already in place for credit cards and personal loans.
Key protections include:
- Clear, upfront information about BNPL agreements, ensuring borrowers understand when payments are due, repayment amounts and consequences of missed payments.
- Affordability checks, so lenders assess whether customers can reasonably afford repayments before extending credit.
- Support for those in financial difficulty, including guidance toward free debt advice services.
- Access to the Financial Ombudsman Service for disputes, offering an independent route for complaints and compensation.
These measures aim to curb the risk of consumers over-extending themselves a concern that policymakers and consumer groups have raised as BNPL usage has surged, with around 11 million adults in the UK using such products in the past year.
What the Regulation Means for Firms
For firms that currently offer BNPL products, the switch to regulation means early preparation is essential. From 15th of May 2026, lenders can register with the Temporary Permissions Regime, giving them time to align systems and controls ahead of the full regime start. Those that continue to enter into DPC without authorisation after July 2026 risk enforcement action.
The FCA’s regulatory approach is designed to be proportionate whilst keeping space for innovation and delivering robust protections for consumers.
Looking Ahead
This regulatory milestone signals a maturation of the BNPL sector. Firms should now reassess compliance frameworks to embed fair lending practices, transparency and sustainable affordability checks. For consumers, the changes represent a long-awaited boost in financial protections when using BNPL balancing convenience with confidence.
