FCA Confirms Full BNPL Regulatory Deadlines

The Importance of BNPL Products and Warning Signs

Currently, BNPL covers a range of credit agreements, some of which already fall under the FCA’s remit and are regulated. The change comes for the products known as Deferred Payment Credit (DPC) options by the FCA. These previously unregulated products play an increasingly important role as people struggle with their finances.

FCA research shows that these deferred payment credit options were used by 20% of UK adults (10.9 million) in 2024, up from 17% just two years earlier. For those on lower incomes, such as lone parents, these figures go up to 40% using deferred payment options. In addition, there has been an increase in people using these agreements to pay for essentials such as groceries. In terms of money, the growth in just seven years has been incredible, from £0.06bn being lent in 2017 to over £13bn in 2024.

These products are a popular choice for people looking to spread the cost of more expensive items, interest-free, and the very ease of taking out these loans can lead people into financial difficulty with multiple loans and repayment commitments that they struggle to meet. While the repayment amounts per agreement may be small, taking on several at a time means the debt can quickly build to unmanageable levels, leading to defaults and affecting the customer’s credit score. This is the consumer harm that the new regulation is seeking to prevent and reduce.

What is Changing for BNPL Companies

The products affected by the new regulation are Deferred Payment Credit (DPC) loans. The FCA defines these as “interest‑free credit which finances the purchase of goods or services and that is repayable in 12 or fewer instalments within 12 months or less.” 
The FCA has set out the following changes for firms to now follow when offering these products:

• Information - Ensure the consumer is given adequate information about the loan, before they agree to it, so that they can make effective and informed decision about entering into the agreement. Firms must also keep consumers informed and supported throughout the lifetime of the agreement.
• Creditworthiness - The biggest change in providing these agreements will be the affordability checks that lenders will now be required to perform before providing the loan. It is now the responsibility of the lender to understand more about the consumer’s financial situation and be more active in supporting them to manage their financial wellbeing.
• Existing Consumer Credit Rules - The new regulation uses the existing framework of the Consumer Duty, rather than introducing separate legislation for this product group and firms will be expected to adhere to the high standards and focus on delivering good customer outcomes that this guidance demands.
• Dispute Resolution - Borrowers of DPC products will now be able to apply to the FOS when things go wrong and the lender hasn’t dealt with their complaint to their satisfaction. Full regulated complaint handling rules will also now apply to lenders for their own internal processes.
• Data Reporting - Newly regulated firms will also have reporting obligations to the FCA, and be required to share information such as complaints and customer outcomes to enable more effective regulation of the sector.

For the biggest lenders, they will already have some form of regulatory framework in place as they may already be supplying regulated products elsewhere in the business. The biggest firms in this space are supportive of the new regulations and are actively working with the FCA to shape a structure that works for all parties. The FCA’s latest consultation on their proposals is open for feedback until 26 September 2025.

Actions for BNPL Firms to prepare

The new regime comes into force on 15 July 2026. Temporary permissions applications will open two months prior to this for firms to register, they will have six months after July to apply for and receive full authorisation.

So, what do BNPL providers need to do to adapt and prepare for their new obligations?

• Information Disclosure and Customer Communications - Review what information is shared with customers, and when. Make sure the communications are in plain language as much as possible, even while explaining the possible risks and implications of the loan and setting out clear terms and conditions. Also, develop a plan for keeping in touch with that customer for the duration of the loan. Ensure customers can contact you through a variety of channels if they have any questions or are struggling with repayments.
• Creditworthiness Assessments and Processes - Determine the process and criteria for assessing creditworthiness and affordability. How does this need to change from current processes and how will this affect the timeframe for approving the loan? Decide how to undertake the necessary income and expenditure assessments and the best ways to gather and validate this information using both technology and expertise.
• Existing Consumer Credit Rules - The rules are based on the existing Consumer Credit and Consumer Duty FCA guidelines which firms should be familiar with. Preventing consumer harm and delivering good customer outcomes are the two guiding principles of these regulations and firms should be able to evidence the efforts they undertake to adhere to these principles.
• Dispute Resolution Processes - Review internal complaints processes to confirm they are compliant with the full regulation. It is expected that there will be an increase in customer contact because of these changes so a wider review to encompass both systems and people should be undertaken to ensure the proper resource and capabilities are available. In addition, firms should familiarise themselves with what is required when cases get escalated to the FOS. As well as what information needs to be provided, and how can this be created and managed in the most effective and efficient way.
• Data Reporting - Linked to the above is the new reporting that is required by the FCA. Firms should review how they gather, manage, analyse and report on all the required information. In addition to complaints reporting, this also includes wider activity on the DPC products such as customer outcomes and product sales data. These are standard and regular reports that the FCA require to be more effective regulators, while also not created a significant reporting obligation on businesses.

Partnering with experts in this space

Although there is much change regarding financial services regulation at present, with the Consumer Credit Act, FCA Consumer Duty rules, and role of the FOS all under review, BNPL firms should start acting now to prepare for the expected regulation. In particular, process and operational capability reviews are important to understand where you are now and where you are expected to get to under a fully regulated business model. 
If anything, the new regulations recognise the ongoing importance of the BNPL model to the UK’s financial health and the economic growth, that is the Chancellor’s priority. The incredible growth since 2017 is also predicted to continue with some estimates forecasting a 10% annual growth rate.

In such a competitive and growing sector, companies that adopt these regulations can use them to build a better understanding of, and relationships with, their customers, offering a positive competitor advantage.