BNPL Regulation: What Firms Need to Know as the FCA Tightens Oversight
The UK’s Buy Now Pay Later (BNPL) sector is entering a pivotal phase. With the Financial Conduct Authority (FCA) confirming that regulation will take effect from 15 July 2026, firms in this sector must now prepare for a significant shift in compliance expectations, customer protections, and operational oversight.
Why BNPL Regulation Matters
BNPL has become a mainstream credit option, used by over 10 million UK consumers in the past year. While it offers flexibility and convenience, the sector has operated largely outside the FCA’s regulatory perimeter until now. The FCA’s dual publications; “Protections to help BNPL borrowers navigate their financial lives” and “Regulating Buy Now Pay Later” highlight the regulator’s intent to balance innovation and growth within the sector alongside robust consumer safeguards.
What’s Changing from July 2026?
From 15 July 2026, BNPL lenders will be subject to full FCA oversight. Key regulatory requirements include:
FCA Authorisation: All BNPL lenders must be authorised or operate under the Temporary Permissions Regime (TPR) while their applications are processed.
Consumer Duty Compliance: The FCA will apply its outcomes-based Consumer Duty framework, requiring firms to deliver good outcomes across the customer journey.
Creditworthiness Assessments: Firms must conduct proportionate affordability checks for each agreement, even for low-value, interest-free credit.
Enhanced Consumer Disclosures: New rules will require firms to present key product information prominently and proactively, including repayment terms, consequences of missed payments, and statutory rights.
Ongoing Customer Support: Firms must communicate clearly throughout the agreement lifecycle, especially when customers miss payments or face financial difficulty.
Access to Redress: Consumers will gain access to the Financial Ombudsman Service for dispute resolution.
Who Will Be Regulated?
The new rules apply to lenders offering BNPL agreements to finance purchases from merchants.
However, merchants offering their own BNPL products will not be regulated, and credit broking of BNPL agreements will also remain outside the scope.
A Shift Toward Outcomes-Based Regulation
As we have seen across the wider financial services industry, the FCA is embracing a more flexible, outcomes-focused approach. Through this new regime, the FCA is encouraging firms to improve their approaches to communicating key information and ensuring customers understand what they are signing up for, and the impacts of this type of credit on their file.
This shift signals a broader regulatory evolution, with the FCA prioritising consumer understanding and support as opposed to providing specific rules to be adhered to that may not suit all products or customers.
What Should Firms Do Now?
With the consultation closing on 26 September 2025 and final rules expected in early 2026, BNPL firms should:
Assess Authorisation Needs: Determine whether your firm requires FCA authorisation and prepare for the TPR.
Review Customer Journeys: Map out the end-to-end customer experience and identify where disclosures, support, and testing are needed.
Update Policies and Controls: Align internal processes with the FCA’s expectations on affordability, vulnerability, and dispute resolution.
Engage with the Consultation: Provide feedback to help shape proportionate, practical rules for the sector.
Looking Ahead
The FCA’s approach to BNPL regulation is both pragmatic and protective. It offers firms the flexibility to innovate while ensuring consumers are treated fairly and transparently. For firms that act early, this is an opportunity to lead the market in responsible lending and customer-centric design.
Need help navigating BNPL regulation? Avyse Partners supports firms through authorisation, compliance transformation, and regulatory engagement. Contact our team to discuss how we can help you prepare for 15 July 2026.