The UK is set to bring Buy Now, Pay Later (BNPL) products under full regulatory oversight, with the Financial Conduct Authority (FCA) confirming that the sector will be regulated from 15 July 2026.
The change will see BNPL formally classified as Deferred Payment Credit (DPC), ending a long-standing exemption that allowed most providers to operate outside the UK’s consumer credit regime.
The new framework marks a significant shift for the retail and payments sectors, where BNPL has become a common checkout option both online and in store.
From mid-2026, firms offering BNPL through third-party lenders will need to meet the same regulatory standards as other consumer credit providers, with a stronger focus on affordability, transparency and consumer protection.
FCA authorisation and transition arrangements
Under the new rules, BNPL lenders must be authorised by the FCA to continue operating in the UK from 15 July 2026.
To manage the transition, the regulator plans to introduce a Temporary Permissions Regime, allowing existing providers to keep trading while their authorisation applications are assessed.
The move follows legislation passed in 2025 to bring BNPL within the scope of financial regulation. A final policy statement setting out detailed rules is expected in early 2026, following a consultation process that closed in September 2025.
Firms that fail to secure authorisation or temporary permission by the deadline may be required to withdraw regulated BNPL products from the market.
Merchants offering BNPL through third-party providers will not need FCA authorisation themselves, but they will be indirectly affected by the new regime through closer oversight of retail partners by regulated lenders.
Mandatory affordability checks and consumer duty
A central element of the FCA’s approach is the introduction of mandatory affordability and creditworthiness checks for every BNPL transaction. Providers will be required to assess whether customers can afford repayments before agreeing to a deferred payment plan, regardless of the transaction value.
BNPL firms will also be brought within the scope of the FCA’s Consumer Duty, which requires financial services providers to deliver good outcomes for customers.
This includes clearer pre-contract information at checkout, fair product design and ongoing monitoring of customer outcomes, including how products are promoted and used in retail environments.
While the FCA is not proposing to apply the full consumer credit disclosure regime, it expects firms to provide clear and balanced information before customers commit to a purchase.
Providers are also encouraged to use digital tools such as email or SMS reminders to help customers manage repayments and avoid missed payments.
Stronger consumer protection and complaints access
The new regulatory framework will extend key consumer protection rights to BNPL users. Customers will gain access to the Financial Ombudsman Service, giving them a formal route to escalate complaints if disputes cannot be resolved directly with providers.
The FCA is also addressing how interest and fees are charged. Under the proposed rules, firms will be prevented from applying backdated interest on amounts repaid within promotional or interest-free periods, a practice that has attracted regulatory scrutiny in other credit markets.
For retailers, lenders and technology platforms embedded in the BNPL ecosystem, the shift to full FCA oversight represents a major operational change.
As the July 2026 deadline approaches, firms across the UK retail sector are expected to review partnerships, systems and compliance processes to ensure continued access to deferred payment options under the new regulatory regime.
