Comply with Buy Now Pay Later regulation

Buy Now Pay Later (BNPL), known in the FCA regime as Deferred Payment Credit (DPC), lets consumers defer payment or spread costs interest-free. The FCA began regulating DPC on 15 July 2026. A lender entering into new DPC agreements must now hold the relevant FCA authorisation or an existing temporary permission. Registration for the temporary permissions regime has closed.

This guide explains:

• Which agreements are now regulated
• What authorisation is required
• How to comply with the new regime
• Alternative routes to market

Who this guide is for: Fintech providers offering BNPL products, retailers considering BNPL partnerships, and investors assessing regulatory risk in the sector.

Current regulatory position

Since 15 July 2026, lenders entering into new DPC agreements must be authorised by the FCA for the relevant consumer-credit activities or already hold a temporary permission under the DPC temporary permissions regime.

The Article 60F(2) exemption continues to apply to qualifying agreements entered into before 15 July 2026. It does not allow a lender to enter into new in-scope DPC agreements after that date without authorisation or an existing temporary permission.

New entrants: Registration for the temporary permissions regime has closed. A business without a temporary permission must obtain full FCA authorisation before entering into new regulated DPC agreements.

Why regulation is being introduced

The Woolard Review (February 2021) identified significant consumer harm from unregulated BNPL:

• Lack of affordability checks: Consumers can accumulate debt across multiple providers without proper assessment
• Invisible debt: BNPL doesn't appear on credit files, so lenders can't see existing commitments
• No Financial Ombudsman access: Consumers have no regulatory complaints route
• Aggressive marketing: BNPL is often presented as a payment method rather than credit
• Vulnerable consumers: Young people and those with lower financial literacy are disproportionately affected

The government consultation (2022-2023) led to the 2025 amendment Order and the FCA's final rules in PS26/1. The regime took effect on 15 July 2026.

Authorisation and conduct requirements

Regulated DPC lenders need:

FCA consumer credit authorisation

Full FCA authorisation for consumer credit activities, including:

• Demonstrating adequate financial resources
• Meeting threshold conditions (suitability, resources, effective supervision)
• Appointing approved persons (Senior Managers under SM&CR)
• Implementing robust compliance frameworks

Creditworthiness assessments

BNPL providers must assess customer creditworthiness before lending. Proportionate checks may include:

• Income and expenditure verification
• Credit reference agency checks
• Assessment of existing commitments (including other BNPL)
• Proportionate checks based on credit amount and risk

Credit reporting

BNPL agreements will need to be reported to credit reference agencies, making the debt visible to other lenders and improving overall lending decisions.

Consumer protections

Standard consumer credit protections will apply:

• Pre-contract disclosure requirements
• Right to withdraw within 14 days
• Access to the Financial Ombudsman Service
• Fair treatment requirements under Consumer Duty

How to comply

If you do not already hold the required authorisation or a DPC temporary permission, do not enter into new regulated DPC agreements. Full FCA authorisation can take time, so build the required systems and evidence before applying.

Alternative routes to market

Some BNPL providers may consider alternative structures:

Appointed Representative

Operating as an Appointed Representative of an existing FCA-authorised firm allows faster market entry without direct authorisation. However, the principal firm is responsible for your compliance, and the FCA has enhanced oversight of AR arrangements following sector concerns.

White-label through authorised lender

Partnering with an authorised consumer credit lender who provides the regulated credit, while you provide the customer interface. This shifts regulatory responsibility but reduces your margin.

Restructure outside scope

Some providers may restructure products to fall outside consumer credit regulation entirely (for example, invoice factoring models or merchant credit). This requires careful legal analysis to ensure the restructured product genuinely falls outside scope.

Implementation timeline

• 14 July 2025: the government made the amendment Order bringing DPC into the regulatory perimeter
• 11 February 2026: the FCA published final rules in PS26/1
• 15 May to 1 July 2026: registration window for the DPC temporary permissions regime
• 15 July 2026: FCA regulation commenced; new DPC agreements require authorisation or an existing temporary permission

Registration for temporary permission is now closed.

Common questions

Will all BNPL products be regulated?

The regulated scope is now set by the amended Regulated Activities Order and FCA rules. Check the precise product structure rather than assuming that a short term or low value keeps an agreement outside the regime.

Can I continue operating while applying for authorisation?

Only a firm that registered during the temporary-permissions window can rely on that route while moving to full authorisation. The registration window is closed. A new entrant must obtain full authorisation before entering into regulated DPC agreements.

What about merchant partners?

Broking DPC agreements is exempt from regulation, but retailers should still confirm that the lender entering into the agreement is FCA-authorised or holds an existing temporary permission.

How much will authorisation cost?

FCA application fees for consumer credit authorisation are typically £1,500-£5,000 depending on category. However, the real cost is in building compliant systems and processes - budget £50,000-£200,000+ for a full compliance implementation.