Millions of consumers using Buy Now Pay Later (BNPL) services will receive stronger protections from 15 July 2026, when previously unregulated Deferred Payment Credit (DPC) agreements come under the supervision of the Financial Conduct Authority (FCA).
The changes will require third-party BNPL lenders to follow FCA rules designed to improve consumer protection, increase transparency and promote responsible lending.
Until now, many interest-free BNPL products have operated outside FCA regulation. From 15 July, lenders offering eligible Deferred Payment Credit agreements will either need FCA authorisation or operate under the regulator’s temporary permissions regime.
The new rules apply where the lender providing the credit is a different business from the retailer selling the goods or services. Existing Deferred Payment Credit agreements entered into before 15 July 2026 will remain outside the new regulatory framework.
What is changing?
Under the new rules, BNPL providers will be required to:
- Carry out affordability assessments before lending.
- Provide clear information about repayment schedules, fees and consumer rights before an agreement is entered into.
- Offer appropriate support to customers experiencing financial difficulty.
- Give eligible customers access to the Financial Ombudsman Service if complaints cannot be resolved.
- Provide Section 75 Consumer Credit Act protection on eligible agreements entered into from 15 July, meaning consumers may be able to seek a refund from the lender if something goes wrong with a purchase.
Consumers will also be able to check whether a provider is authorised or operating under the FCA’s temporary permissions regime using the FCA Firm Checker.
The FCA said the reforms are intended to reduce the risk of consumer harm while allowing the BNPL market to continue growing responsibly. The regulator also wants firms to provide consumers with sufficient information to make informed borrowing decisions, lend responsibly, support customers facing financial difficulties and improve reporting so it can supervise the market more effectively.
According to FCA figures, more than 10.9 million UK adults used Buy Now Pay Later products during the 12 months to May 2024, while the market was worth more than £13 billion.
What consumers should know
The new protections only apply to eligible Deferred Payment Credit agreements entered into on or after 15 July 2026. Existing agreements taken out before that date will remain subject to the previous rules.
Not every instalment payment option will be regulated. The FCA’s rules generally apply where the credit is provided by a third-party lender rather than the retailer selling the goods or services.
Consumers may also notice additional checks when applying for Buy Now Pay Later finance. Under the new rules, lenders must assess whether borrowing is affordable before approving an application.
If a consumer experiences problems with a regulated BNPL agreement after 15 July, they will have the right to complain to the lender and, if the matter is not resolved satisfactorily, escalate the complaint to the Financial Ombudsman Service.
For eligible agreements entered into from 15 July, consumers may also benefit from Section 75 protection under the Consumer Credit Act, giving them additional rights to seek redress from the lender if goods or services are not provided as expected.
Industry reaction
Theresa Lindsay, Chief Marketing Officer at Novuna Consumer Finance, commented
“Buy Now Pay Later can be a valuable way for consumers to spread the cost of larger, planned purchases, however some unregulated products have become so seamless that borrowing can feel almost invisible for smaller everyday purchases.
“These reforms are a positive step towards ensuring credit is used responsibly. By introducing greater transparency and affordability assessments, they will help consumers better understand the commitments they’re taking on and make informed borrowing decisions. This is important for everyday spending, where the ease of accessing credit can sometimes encourage purchases that may not fit within a customer’s budget.
“The changes should help create a more consistent and responsible lending environment, while preserving the established benefits for retailers and customers that Buy Now Pay Later can offer for big-ticket items.”
Novuna Consumer Finance said it already operates under FCA regulation and has existing affordability assessments in place as part of its responsible lending approach.
The FCA has published detailed guidance explaining the new rules, including which agreements are covered, consumers’ rights under the new regime, and the obligations placed on lenders from 15 July 2026.
Feature image by Leeloo The First from Pexels
