FCA sets stricter UK rules for buy now, pay later firms

The UK's Financial Conduct Authority (FCA) has confirmed new consumer protections for Buy Now, Pay Later (BNPL) borrowers. Providers will face tighter oversight and wider regulatory coverage from 15 July 2026.

Borrowers will receive clearer information and upfront details about agreements. The package also includes affordability checks, support for customers who need it, and access to complaints and compensation routes.

BNPL products have grown quickly in the UK, particularly at online checkouts and through retail finance offers. The new framework brings more of this activity closer to the rules that apply across consumer credit, increasing requirements for firms operating in the sector.

John Pauley, a financial services regulation partner at Harper James, called the rules a material change for the market. He said more BNPL activity will fall within the FCA's "regulatory perimeter", raising expectations for how providers operate and assess customer outcomes.

"The new buy now, pay later rules have been a long time coming, and they will be a significant shift for firms offering BNPL products. From July 2026, much more activity will fall within the FCA's regulatory perimeter, which means providers should expect higher compliance expectations, stronger governance and a clearer requirement to assess affordability and treat customers fairly," said Pauley.

Wider scope

A key focus will be third-party providers that have offered BNPL without regulatory oversight. Pauley said the FCA is particularly focused on unregulated third-party BNPL, which it calls Deferred Payment Credit.

The changes draw a clearer distinction between lenders that offer credit directly and retailers that offer certain arrangements as part of the sales journey. The new rules are expected to reshape how some third-party providers structure their products, disclosures, and customer service.

Pauley said some firms have operated without the relevant lending permissions and will face tougher expectations once the framework takes effect.

Transition window

The FCA is also setting out a route for affected providers to keep operating while they seek authorisation. Pauley said the Temporary Permissions Regime will allow firms to continue offering Deferred Payment Credit while the FCA considers applications.

He added that the timeline for entering the regime is tight. The notification window, proposed under the last BNPL consultation, would run from 15 May to 1 July 2026.

The compressed window means firms will need to prepare well in advance, particularly if they have not previously held consumer credit permissions. Providers may need to review affordability checks, how they present key information before agreement, and how they support customers who fall into difficulty.

Readiness work

Pauley said firms should use the coming months to map their products, identify permission gaps, review customer journeys, and prepare for greater regulatory scrutiny, including getting advice on registration requirements.

He said retailers may still be able to offer certain unregulated BNPL arrangements once the legislation changes, but they will need to understand the boundary between regulated and unregulated activity.

For third-party lenders, the shift is likely to affect compliance and operational planning, including governance, internal controls and customer communications. Pauley warned that firms that miss the transition opportunity could face disruption.

"Firms should be using the coming months to map their products, identify permission gaps, review customer journeys and prepare for increased regulatory scrutiny, taking advice to assist with registration requirements. Retailers may still be able to offer certain unregulated BNPL arrangements under the amended legislation, but they will need a clear understanding of where the boundary sits. That said, given the very tight timeframe, affected third-party lenders should seek advice to avoid missing the opportunity of the transition period and facing business disruption," said Pauly.