BNPL regulation is live: FCA authorisation, affordability checks, and Consumer Duty apply from 15 July 2026
Third-party BNPL lenders and their distributors now need FCA authorisation, affordability checks, and Consumer Duty compliance. Merchant credit arrangements may still sit outside the regime.
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Action required for third-party BNPL lenders and their distributors. Worth reviewing if you offer or distribute any instalment-credit product and are unsure whether it falls within scope. Routine context for all other firms.
Buy-Now, Pay-Later products came under FCA regulation on 15 July 2026 (gov.uk announcement), ending years outside consumer credit rules.
Who is in scope
The new regime targets third-party BNPL lenders, where the lender is a separate entity from the retailer: Klarna, Clearpay, and PayPal are the familiar examples. Until now, most Pay in 3 products fell outside the Consumer Credit Act 1974 by being interest-free, repaid within 12 months, and structured across no more than 12 instalments; that exemption is now closed for in-scope products. If the retailer itself is providing the instalment plan, sometimes called merchant credit, it may remain outside the new rules.
What the rules now require
Lenders must carry out affordability checks before offering credit.
They must provide clear upfront information about payment amounts, due dates, and the consequences of missing a payment.
They must support consumers in financial difficulty and direct them to free debt advice rather than immediately passing accounts to debt collectors.
BNPL firms are now subject to the Consumer Duty, the FCA's overarching good-outcomes standard.
Lenders must be FCA-authorised to offer in-scope products from 15 July 2026. If you are not yet authorised and are offering BNPL, that is the first thing to address.
Complaints and credit reporting
Consumers can now take BNPL complaints to the Financial Ombudsman Service (FOS), though only for agreements taken out on or after 15 July 2026 with regulated firms. The FOS expects around 2,000 BNPL complaints this financial year, its first year with jurisdiction over the sector.
BNPL agreements may now be reported to credit reference agencies. If your firm does not currently have a credit reporting process, this is an operational gap to assess.
Legacy agreements
Agreements taken out before 15 July 2026 are generally unaffected. The new obligations apply to new agreements from the commencement date only.
The FCA has not yet set out the specific affordability-check methodology or evidential standard it expects. That is the most operationally significant open question; watch for FCA guidance on this point.
