FCA shapes rules for BNPL at start of one year countdown to new regime

Buy-now pay-later providers often rely on exemptions to remain outside the scope of regulation. As the UK plans to tighten these exemptions, more BNPL firms will need to seek authorisation from the Financial Conduct Authority and comply with its rules. The FCA is now consulting on those rules which will apply from next summer.

Change is on its way

Earlier this year the Government laid legislation to bring more BNPL agreements into the scope of the Consumer Credit Act (see: UK to regulate buy-now, pay-later: Your next instalment is due). That legislation specifies that the BNPL regime will start to apply on 15 July 2026, subject to transitional arrangements.

The FCA has now launched CP25/23 to propose rules that will apply to providers of BNPL agreements. Consistent with the legislation, the FCA refers to unregulated BNPL as deferred payment credit lending.

A combination of prescriptive and high-level rules

The proposals include requiring BNPL providers to:

• give key product information to consumers before they enter into a BNPL agreement, including the main consequences of missing payments,
• make additional product information available to customers, such as an explanation of the protections available under the Consumer Credit Act,
• check that borrowers can afford to repay BNPL loans,
• flag to customers when they miss a repayment,
• offer support if they get into financial difficulty,
• meet complaints handling rules,
• send regular information to the FCA, including product sales data, and
• comply with the Consumer Duty.

The Consumer Duty is an outcomes-based regime requiring firms to act to deliver good customer outcomes. This includes considering the needs of vulnerable customers, assessing whether their products offer fair value and supporting customers’ understanding of their products. BNPL firms will need to monitor and test their communications to show that customers understand them. Unlike other forms of regulated consumer credit, the FCA does not plan to prescribe the content or form of BNPL agreements.

BNPL customers will also be able to complain to the Financial Ombudsman Service if something goes wrong. The wider role of the FOS is currently under review (see: Leeds Reforms: Starting gun sounds for comprehensive reforms to the FOS).

Other FCA rules

As well as imposing product-specific requirements, the FCA plans to extend other parts of its rulebook to BNPL providers. These include:

• The FCA Principles, e.g. the requirement to be open and cooperative with the FCA,
• The Threshold Conditions which firms must satisfy to become and remain authorised,
• Systems and controls rules and guidance, including operational resilience requirements for the largest firms, and
• The Senior Managers and Certification Regime, which is currently under review (see: Leeds Reforms: the SMCR proposals at a glance).

Transitional arrangements

A temporary permissions regime will allow firms to continue trading while the FCA processes their authorisation application.

Firms can register for temporary permission two months before the regime comes into force. The notification window will open on 15 May 2026 and close on 1 July 2026. Firms with temporary permission will then have until 15 January 2027 to apply for full authorisation. The FCA expects to determine complete authorisation applications within six months.

Out of scope

The new regime is intended to apply to providers of BNPL agreements used to finance the purchase of goods or services from a merchant. Merchants that offer their own BNPL agreements directly to customers will not be in scope. In a recent statement HM Treasury has also confirmed that merchants who broker BNPL agreements should not be required to seek a credit broking licence.

Next steps

The consultation closes on 26 September 2025. The FCA plans to finalise the rules in early 2026. The BNPL regime will start to take effect from 15 July 2026.