In brief
On 15 May 2026, the Financial Conduct Authority (FCA) launched the temporary permission regime (TPR) for regulated buy-now-pay-later (BNPL) lending, formally termed “regulated deferred payment credit”. Firms that are in scope must now register by 1 July 2026 and begin preparing for full authorisation. For many organisations in the BNPL space, this marks the start of a significant regulatory transition.
In more detail
The registration process
Lenders offering BNPL products that fall within the scope of the new regime will need to apply for temporary permission by 1 July 2026. The process requires completion of the relevant notification form and payment of a GBP 280 fee. Firms that fail to register before the deadline to enter the TPR risk breaching the general prohibition if they continue operating without the required permission.
Transition to full authorisation
The TPR is an interim measure only. In-scope lenders should therefore consider now whether they will seek full authorisation or whether their product offering can be restructured so that it falls outside the scope of regulation.
Applying for full authorisation is likely to be a significant and time-consuming process. The FCA will expect firms to provide substantial information and supporting documentation, including financial information, regulatory compliance and governance frameworks, as well as a detailed regulatory business plan. In our experience, it can take considerable time to collate the necessary materials and prepare a complete application. Although the deadline for authorisation applications is January 2027, firms should begin identifying required information, gathering supporting documents, and preparing draft materials now.
Immediate regulatory concerns
In parallel with registration and authorisation planning, firms should assess the main gaps in their current compliance framework. As a priority, firms should consider the FCA’s Consumer Duty, which requires firms to deliver good outcomes for retail customers. Firms should consider whether their products offer fair value, whether customer communications are clear, fair and not misleading, and whether appropriate support is available throughout the product lifecycle. Assessing Consumer Duty compliance can be challenging, particularly as the requirements are subjective and outcomes focused. Firms should carry out a targeted gap analysis to identify areas requiring remediation.
Firms should also review the Consumer Credit Sourcebook (CONC) requirements that will apply to their products and customer journey, including obligations around pre-contract disclosures and supplementary information. Compliance with these requirements will help support Consumer Duty outcomes, but firms should still review checkout journeys, customer communications and template wording through a broader regulatory lens.
Firms offering regulated BNPL products will also need to design and implement an affordability assessment process that complies with the relevant FCA requirements. In practice, this can be challenging because the CONC rules focus on outcomes rather than prescribing a single process design. Firms should implement robust processes that allow them to document their methodology, reasoning and governance clearly. Existing affordability or underwriting checks should be stress-tested against the FCA’s specific requirements.
Firms offering regulated BNPL products will also be subject to the FCA’s complaints-handling rules and fall within the compulsory jurisdiction of the Financial Ombudsman Service. Firms should review customer support arrangements, complaints procedures and customer-facing documentation to ensure that they meet the relevant FCA requirements. The FCA prescribes both how complaints should be handled and the timeframe within which firms should respond.
Immediate actions
Firms that may be in scope should act promptly to confirm whether registration is required and, if so, ensure that temporary permission is obtained before the 1 July 2026 deadline. Firms should also review systems, controls, customer journeys and communications to identify key compliance gaps, while beginning work now on the materials likely to be needed for a full authorisation application. Failure to register or obtain the required authorisation may expose a firm to significant regulatory risk, including the risk of committing a criminal offence.