FCA acts against unclear or unfair contract terms of two BNPL firms

The Financial Conduct Authority last used its powers under the Consumer Rights Act 2015 in October 2023 against two buy now pay later firms, HM Treasury's impact assessment on the draft Buy Now Pay Later regulations states¹. The document, published on 19 May 2025 and signed by the responsible minister on 28 April 2025, records the action in a passage on the FCA's earlier use of its powers, which it says included action "in August 2022 with adverts for BNPL products that emphasised benefits without sufficiently disclosing relevant risks"¹.

The impact assessment does not name the two firms, the terms challenged or the outcome of the October 2023 action. Those details have not been reported in the document¹.

The wider regulatory picture

BNPL is described in the assessment as "a type of interest-free instalment credit that allows borrowers to divide the cost of purchases into regular payments over a period not exceeding 12 months"¹. Such agreements currently fall within an exemption in article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, which covers borrower-lender supplier agreements for fixed-sum credit where there are no more than 12 payments, made within 12 months or less, and the credit is provided without interest or charges¹.

Because of that exemption, firms offering only these agreements do not need to be authorised or regulated by the FCA and are not under the jurisdiction of the Financial Ombudsman Service, the assessment says¹. The government's preferred option is to regulate BNPL and require lenders to provide information in line with FCA rules rather than the Consumer Credit Act's information provisions, with lenders under FCA supervision, affordability assessments, access to the Financial Ombudsman Service and key rights such as section 75 of the Consumer Credit Act¹.

The assessment sets out the scale of the market and the risks identified:

The assessment also cites a survey finding that almost a third of BNPL users questioned in November 2023 had borrowed from elsewhere to pay off BNPL debts in the previous 12 months, and that 46% of users used BNPL for its interest-free nature, 40% to buy goods they could not afford in one go and 30% to help with budgeting¹. On merchant coverage, it says that in 2021 over 20,000 merchants offered BNPL at checkout, a figure the government believes has at least doubled as of November 2024¹.

Why it matters for households

The October 2023 action concerned the terms BNPL firms used in their contracts with customers. The unfair contract terms regime allows terms that fail fairness requirements to be challenged and, where a term is not enforceable, it cannot be relied on against the consumer. The assessment does not say which terms were at issue or what changed for customers of the two firms as a result¹.

More broadly, the document confirms that BNPL agreements within the article 60F(2) exemption sit outside FCA authorisation and outside the Financial Ombudsman Service, so users of those products do not have the same statutory protections as users of regulated credit such as credit cards and personal loans¹. The government's stated aim is that borrowers would gain access to the ombudsman and to rights including section 75 of the Consumer Credit Act, and that lenders would have to carry out affordability assessments¹. Those changes are not yet in force.

What happens next

The assessment says regulation is set to come into force twelve months and one day after the secondary legislation is made¹. A levy on firms will commence when the amended framework takes effect, expected in April 2026¹. The government proposes to review the legislative provisions and publish a report on its conclusions at least every five years, with a review date of Q3 2030 given in the document¹. The FCA will conduct a cost benefit analysis on its own new rules, which the assessment says are not yet designed¹.