BNPL moved into the FCA’s regulatory perimeter on 15 July 2026, bringing affordability checks, Consumer Duty obligations and Financial Ombudsman access to a UK market used by 11 million adults.
Deferred payment credit (DPC), the interest-free instalment product known as buy now pay later (BNPL), became a regulated form of consumer credit in the UK on 15 July 2026. The Financial Conduct Authority (FCA) confirmed the start date in Policy Statement PS26/1, published on 11 February 2026, following the government’s July 2025 decision to legislate.
BNPL products sat outside consumer credit rules until then. The second Payment Services Directive (PSD2), which came into force in 2018, covered payment services rather than credit provision, leaving providers able to offer interest-free instalments without affordability assessments or formal consumer protections.
Klarna and Clearpay built the market from £60m (US$75m) in 2017 to more than £13bn in 2024, with 11 million UK adults using the product, according to the FCA’s 2024 Financial Lives Survey.
The rules apply to third-party lenders providing DPC through merchants. Agreements where the lender and the supplier of goods or services are the same firm remain exempt, following a 2024 government decision on merchant own credit.
What BNPL rules require
Lenders must carry out proportionate affordability checks before offering BNPL and give customers upfront detail on payment dates, amounts and the consequences of missed payments. The sector falls under the FCA’s Consumer Duty. Customers in financial difficulty are entitled to support from their lender, including signposting to free debt advice, and can take complaints to the Financial Ombudsman Service.
Sarah Pritchard, Deputy CEO at the FCA, said: “We want the Buy Now Pay Later sector to thrive – it provides an important source of credit to many. But crucially, no one should be lent to if they’re unable to repay, because that could worsen their financial situation.”
Damien Burke, Head of Regulatory Practice at Broadstone, said: “Applying the Consumer Duty to BNPL should materially improve outcomes for consumers, particularly through clearer disclosures and proportionate affordability checks.” He said the change was important “for a product that is often positioned as a budgeting tool rather than credit”.
What it means for providers
Lenders need FCA authorisation to offer BNPL. The FCA opened a temporary permissions regime for registration between 15 May and 1 July 2026, letting existing providers keep trading while their applications were assessed. Only firms already carrying out DPC activity on 15 July 2025 qualified. Firms have six months from Regulation Day to submit full authorisation applications.
Affordability checks add a step to a checkout process built for speed. Kristaps Zips, UK CEO at payabl., pointed to automation. “Innovations in predictive analytics and AI can enable real-time analysis of transaction data to support smarter decisions and approvals, without leading to increased defaults or extra friction at checkout,” he said.
Klarna, one of the largest BNPL providers, welcomed the change. A company spokesperson said the rules “will raise standards across the market, give consumers clearer protections like Section 75, and make BNPL even more appealing to consumers”, adding that the firm already offered regulated credit products and applied the same standards to its BNPL business.
How the UK compares
Other major markets are regulating BNPL on different timetables.
- The EU brings most BNPL arrangements into consumer credit law under the second Consumer Credit Directive (CCD2), which applies from 20 November 2026 and requires affordability checks, pre-contract disclosure and national caps on fees and APR.
- Australia regulated BNPL as “low cost credit contracts” under its National Consumer Credit Protection Act from 10 June 2025, requiring providers to hold an Australian Credit Licence and join the Australian Financial Complaints Authority.
- US regulators pulled back at the federal level: the Consumer Financial Protection Bureau withdrew its 2024 rule treating BNPL as credit cards in May 2025 and said it would not replace it, leaving oversight to individual states such as California and Oregon.
The FCA links repeat BNPL use to the risk of unaffordable debt, with no protections previously in place for consumers borrowing across multiple providers. Bringing DPC under the Consumer Duty applies the same disclosure and affordability standards that govern other consumer credit.
Alastair Douglas, CEO of TotallyMoney, said: “The problem the government and regulator face next is what fills the BNPL gap once lending is tightened up,” he said.
“If people who’ve relied on it for so long suddenly find themselves locked out, they’ll start to look for credit elsewhere – which could push the vulnerable into the arms of unregulated and illegal lenders.”
Zips said firms should use the transition to prepare. “It is vital that those operating in the BNPL space, particularly fast-growing fintechs, take the time to make sure they are fully prepared for these changes.”
