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Buy Now Pay Later – Preparing for a New Regulatory Era

From 15 July 2026, Buy Now Pay Later (“BNPL”) will fall under the supervision of the Financial Conduct Authority (“FCA”) as a fully regulated consumer credit product. Lenders will need to operate within the same governance and risk management frameworks used for traditional lending products, representing a fundamental shift in how BNPL products are designed, sold and monitored.

The Deferred Payment Credit (“DPC”) sector, more commonly known as BNPL, has experienced significant growth in recent years. By 2024, lending reached approximately £13 billion, with around one in five UK adults using BNPL.¹ This growth has sharpened the regulatory concern that a product originally positioned as frictionless convenience can in practice operate as unaffordable lending for some consumers, particularly where repeat usage and low visibility of total indebtedness are factors.

The FCA published its final rules on 11 February 2026 in PS26/1 and set clear milestones ahead of the new rules coming into force on 15 July 2026 (“Regulation Day”). The tone has been firmly set by the FCA for DPC lenders as they prepare to come under its supervision, with the deputy chief executive at the FCA recently stating that "no one should be lent to if they’re unable to repay, because that could worsen their financial situation."²

Alongside preparations to comply with the new rules, DPC lenders must also prepare for other regulations that will also apply, such as the Consumer Duty.³ In practice, this means BNPL data (on affordability, usage patterns and arrears) will need to feed directly into the monitoring of outcomes under the Consumer Duty. Lenders that treat this as a parallel workstream rather than an integrated one are likely to struggle.

The changes represent a shift from product-led design to more credit-led operating models. As a result, DPC lenders should carefully consider the design of new systems and controls and not treat these as a simple bolt-on to existing operations. For most, this will require meaningful redesign of decisioning, customer journeys and governance, not just incremental fixes.

Key Dates

DPC lenders should now be confirming their approach by choosing to either obtain full FCA authorisation ahead of Regulation Day or to initially enter the Temporary Permissions Regime (“TPR”). Alternatively, some lenders may opt to suspend their lending activities.

5 May to 1 July 2026 – Apply for TPR
DPC lenders that do not hold relevant consumer credit permissions can register for the TPR between 15 May and 1 July. This allows lenders to continue operating temporarily on and after Regulation Day while the FCA considers permission applications.

15 July 2026 – Regulation Day
The new regime takes effect on 15 July 2026. Lenders without the appropriate permissions or TPR status must cease all new DPC lending activities, though agreements taken out before this date may be exempt.

The practical reality is that lenders leaving authorisation or TPR decisions late are risking operational disruption, as well as increased regulatory risk.

Building Your Compliance Capabilities

The transition of BNPL to a regulated consumer credit product will require more than simply enhancing existing processes. Frameworks should be proportionate, scalable and designed to embed regulatory expectations into overall governance measures, operating models and risk management systems and controls. In many cases, legacy checkout-led platforms will not support the level of decisioning, auditability and reporting required. This means investment in resource and technology to evidence and sustain ongoing compliance.

Ensuring Responsible Lending Through Robust Assessments and Transparency

Affordability assessments
Lenders will be required to carry out affordability assessments prior to approving credit. This moves BNPL away from ‘soft’ or near-instant approvals towards more structured credit decisioning, often requiring external bureau data and clearer internal risk models. The key challenge will be in evidencing these checks and lenders should expect scrutiny on model assumptions, data sources and override processes.

Transparent key product information
Customers must be provided with ‘key product information’ before they enter into a DPC agreement. This includes disclosing upfront the credit amount, payment schedules and consequences of missed payments. Lenders will need to balance the clarity needed with conversion necessary. Poorly designed disclosures that technically comply, but are ignored by customers, are unlikely to satisfy regulatory expectations under the Consumer Duty.

Provide Proactive Support and Effective Complaint Resolution

Supporting customers in financial difficulty
DPC lenders must offer support to customers who are, or may be, in financial difficulty. This will require earlier intervention strategies, not just reactive collections processes. Lenders should also expect increased focus on vulnerability, particularly given BNPL’s use among younger and more financially stretched consumers.

Complaints handling and resolution under the Consumer Credit Act
Customers will now be able to escalate complaints to the Financial Ombudsman Service if they are unhappy with how the lender has responded to their complaint.⁴ Additionally, the extension of Section 75 protections is likely to be one of the most commercially significant changes, which aligns BNPL with protections customers have historically expected from credit cards and other regulated lending.

New Reporting Requirements

The FCA is introducing data reporting requirements to support its supervision of DPC activity, including the submission of product sales data for lenders whose agreements reach over £2 million in a year. The challenge here is less about reporting itself and more about data integrity. Many BNPL models were not built with regulatory-grade management information in mind, and gaps in data lineage, definitions and controls will quickly become exposed.

Have you Begun Your Preparations?

Bringing BNPL into consumer credit regulation marks a clear change for the market. Lenders will need to move beyond treating BNPL as a payments product and manage it in the same way as other lending products. This means building the right processes, systems and oversight to meet regulatory expectations, while also making sure customers can afford what they borrow, receive fair value and understand how the product works.

For some lenders, this will be a fundamental reset. Those that built their proposition around speed and minimal friction will need to rethink how they balance customer experience with regulatory compliance. Lenders that invest early in robust credit decisioning, clear customer journeys and integrated governance are likely to gain a competitive advantage as weaker or less prepared players exit, scale back or spend significant resources on regulatory remediation. With the implementation deadline approaching, the priority should now be turning these requirements into practical and workable solutions.

Footnotes:

1: “PS26/1 Regulation of Deferred Payment Credit (unregulated Buy Now Pay Later) Feedback to CP25/23 and final rules,” FCA (February, 2026)

2: “New protections confirmed for Buy Now Pay Later borrowers,” FCA (February, 2026)

3: “Consumer Duty,” FCA

4: “New protections confirmed for Buy Now Pay Later borrowers,” FCA (February, 2026)