In brief
The long-awaited Buy Now, Pay Later (BNPL) legislation has finally been made by the Government, requiring certain providers of BNPL products to be Financial Conduct Authority (FCA) authorised or hold a temporary permission by 15 July 2026. By effect of the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 ("BNPL Order"), where the BNPL lender is a third party (i.e., is not the same party as the merchant), unless another exemption applies, that lender could require FCA authorisation to continue offering BNPL products.
FCA regulatory rules
The BNPL Order disapplies certain requirements of the Consumer Credit Act 1974 in favour of FCA rules and oversight (e.g., certain information disclosure requirements under the Act do not apply). For more on the parameters of the new regime, see our previous alert here. The FCA has now published a consultation paper (CP25/23), with the aims of introducing a more proportionate form of regulation. The consultation paper primarily focuses on:
- Information requirements – the consultation proposes rules that require lenders to give information to consumers to help them make informed and effective decisions about their borrowing (i.e., pre-contract disclosure requirements). The rules also propose certain post-contract disclosures, such as communicating with customers when payments are missed.
- Creditworthiness – BNPL loans will be subject to affordability and credit check requirements, with the current proposal being to apply the rules and guidance in Chapter 5.2A of its Consumer Credit Sourcebook (CONC). The FCA's view is that these rules are principles-based and were drafted for a wide range of circumstances and product-types, making them suitable for use in a BNPL context.
The consultation notes that various other parts of the FCA Handbook will also apply including the FCA's Principles for Businesses, the Senior Managers and Certification Regime, certain requirements of the FCA's Systems and Controls Sourcebook, and its Dispute Resolution: Complaints Sourcebook (including giving access to the Financial Ombudsman Service).
The consultation closes on 26 September 2025. The FCA then plans to publish its final policy statement containing the relevant rules within the first half of 2026, with regulation day being 15 July 2026.
Practical considerations
Firms that currently offer exempt BNPL products should consider whether they will need to become regulated. Firms potentially subject to regulation should consider:
- Whether any other exemptions under the Regulated Activities Order could apply to the product. If not, firms should consider whether they can amend the terms of the product to fall within the scope of a different exemption, wish to become FCA authorised, or potentially wind-down the regulated part of the business.
- Firms that will seek to become FCA authorised should begin collating the information necessary to respond to an application pack. Preparing an application pack can take a significant amount of time, particularly as the FCA requires detailed information on, among others: (i) the regulated product offering; (ii) the firm's controllers and directors; (iii) a detailed regulatory business plan; (iv) the firm's IT systems; and (v) a range of supporting materials.
- Such firms should also consider the consultation paper very carefully and carry out a gap analysis to identify the key risks to its ongoing compliance with BNPL rules.