From the 15th July 2026, ‘Buy Now Pay Later’ (BNPL) will no longer be operating in a regulatory grey area. The FCA has set out a new framework for what it calls 'Deferred Payment Credit' (DPC), bringing third-party BNPL providers within the regulatory perimeter for the first time. IT Brief UK This applies to lenders providing BNPL products, not the retailers and e-commerce businesses offering them at checkout.
Firms offering BNPL products will need to secure authorisation or enter a temporary permissions regime to continue. If your business is thinking of offering, facilitates or is built around BNPL, this changes things considerably.
Deferred Payment Credit is defined as an interest-free credit product used to finance goods or services, repayable in 12 or fewer instalments over 12 months or less. The market has grown from £0.06bn in 2017 to over £13bn in 2024, with around 20% of UK consumers (10.9 million adults) using it in the past year. Rrcompliance The FCA's view is that a market this size needs the same consumer protections as any other form of credit.
Lenders will be required to carry out affordability and creditworthiness checks, provide clearer information on repayment terms, offer support to customers in financial difficulty and comply with FCA conduct standards including the Consumer Duty. Financial IT
On affordability, the change is quite significant. Every BNPL transaction, even purchases under £50, will require mandatory affordability and creditworthiness assessments, regardless of transaction value. TechWire Asia
On complaints, customers will now be able to escalate to the Financial Ombudsman Service if they are unhappy with how the lender has responded. Before these rules, BNPL customers had no official way to complain if something went wrong.
Any firm currently offering BNPL without FCA authorisation must register under the Temporary Permissions Regime (TPR) ahead of Regulation Day. Without this, continuing to operate will be a criminal offence. The TPR acts as a transitional route that allows firms already operating in the BNPL market to continue legally while they work towards full FCA authorisation.
The key dates:
Only firms carrying out DPC activity on 15 July 2025 are eligible for the Temporary Permissions Regime. Any firm that added a BNPL offering after 15 July 2025 but before Regulation Day (15 July 2026) is not eligible for the TPR, regardless of when the FCA's final rules were published. Without TPR registration, these firms cannot enter into new DPC agreements from Regulation Day until they obtain full FCA authorisation - a more restrictive position than established providers who registered for the TPR and can continue trading while their authorisation application is processed.
Being regulated means the FCA can now hold you to account. Affordability failures, inadequate disclosures or poor complaints handling can now result in Financial Ombudsman Service complaints, regulatory enforcement and reputational damage. The Consumer Duty raises the bar further and firms must actively demonstrate good customer outcomes, not just technical compliance.
For scaling companies this is harder to navigate, many are managing new authorisation requirements, system changes to support real-time affordability checks and updated customer journeys, all at once and against a hard deadline. If BNPL is part of your business, the TPR window is open, and operating without authorisation after 15 July will be illegal.
Capsule provides specialist insurance for scale-ups dealing with changing regulations. If you're thinking of making BNPL part of your business or are working through what BNPL regulation means for your liability position, get in touch!
Disclaimer: This content has been produced for general information purposes and should not be taken as formal advice. You should always seek specific professional advice before acting on any of the information given.