Buy Now Pay Later (BNPL) borrowers will benefit from stronger protections from 15th July 2026, following the Government’s decision to bring the sector under the FCA's regulation.
The BNPL market has grown significantly in recent years, from £0.06bn in 2017 to over £13bn in 2024. According to the FCA’s 2024 Financial Lives Survey, 20% of UK consumers (10.9 million adults) used it in the 12 months leading up to May 2024.
BNPL provides an important source of credit for many, but there are no protections in place currently for those who use it repeatedly and may not be able to afford it.
Under the new regulation, BNPL will be subject to the Consumer Duty.
Lenders must carry out proportionate checks to make sure customers can afford to repay what they borrow before offering BNPL and will need to offer support to customers in financial difficulty, and, where appropriate, direct them to free debt advice.
They must also provide borrowers with clear, upfront details about their agreement, including when payments will be due, amounts, and what happens if they miss a payment.
If something goes wrong, consumers will be able to complain to the Financial Ombudsman Service.
Lenders will need to be authorised by the FCA to provide BNPL. Firms will be able to register for the temporary permissions regime between 15th May 2026 and 1st July 2026. Firms will have 6 months (from the date the regime comes into force) to apply for full authorisation.
Sarah Pritchard, deputy chief executive at the FCA, said: “We want the Buy Now Pay Later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products.
"But crucially, no one should be lent to if they’re unable to repay because that could worsen their financial situation. Now parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.”
Alexander Berrai, deputy CEO at emerchantpay, commented: “The FCA’s decision to bring Buy Now, Pay Later under regulation is a necessary step for a sector that has become part of everyday payments. Proportionate affordability checks and clearer consumer information should help ensure BNPL is used responsibly and that consumers are not taking on credit they cannot reasonably repay.
“Clearer rules around credit assessments should also increase confidence among the financial institutions supporting BNPL, reducing risk and improving stability across the wider ecosystem. Over time, this provides a stronger basis for sustainable innovation and a more responsible expansion of BNPL into additional sectors and use cases.
“In the longer term, a more predictable, lower-risk environment may create better conditions for flexible repayment options for consumers, as well as more efficient pricing and improved commercial sustainability for both providers and their funding partners. While outcomes will depend on how the market develops, regulation sets an important framework.
“As a BNPL enabler, we welcome measures that prioritise consumer protection, transparency and financial wellbeing. A well-regulated environment ultimately supports consumers, merchants and the wider payments industry.”
