2025 Order passed setting provisions for regulating BNPL products

The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 was passed on 14 July 2025, setting the provisions to bring interest-free buy now pay later (BNPL) products into regulation¹. From 15 July 2026, those products will be subject to a new regulatory regime overseen by the Financial Conduct Authority (FCA)¹. Firms wishing to provide BNPL products to consumers will need regulatory approval for consumer credit lending, or must enter a transitional regime to gain approval temporarily while a full application is assessed¹.

Under the regime, most merchants offering BNPL from BNPL firms as a payment option will be exempt from credit broking regulation¹. The exemption does not extend to domestic premises suppliers, the legal term for businesses selling goods and services in people's homes, such as plumbers, double glazing companies and mobile hairdressers or beauticians¹. The Government originally excluded these businesses because of historical concerns about pressure selling in customers' homes, which have generally related to high-value, long-term credit agreements¹. The FCA has estimated an average agreement value of £88 for BNPL agreements, which typically run for two months and, by law, cannot run for more than 12¹.

Shortly before the 2025 Order was introduced in Parliament, BNPL firms raised concerns with the FCA that the approach to domestic premises suppliers was disproportionate and could discourage businesses from offering BNPL for essential, low-value services such as plumbing repairs¹. The Government said the concerns were raised too late to alter the legislation without delaying consumer protections, and that insufficient evidence was provided at the time¹.

On 16 June, the Government announced plans to amend the 2025 Order to remove the credit broking regulatory requirements for domestic premises suppliers when they offer BNPL products¹. Evidence from Klarna, PayPal and Clearpay, with trade body Innovate Finance, indicated these suppliers present low consumer risk¹. As of May and June 2025, at least 620 domestic premises suppliers were estimated to offer BNPL through those three firms¹. One BNPL firm reported nearly 5,000 transactions through about 139 domestic premises suppliers in the 12 months to June 2025, with each purchase averaging circa £200¹.

The de minimis impact assessment records one-off savings of £694,400 and a measure coming into force on 3 December 2025¹. The FCA's annual fees and levies for full permission credit brokers are excluded from the Estimated Annual Net Direct Cost to Business calculation, as they are not Regulatory Provisions¹. The transitional regime is not yet open, so none of these businesses has paid anything to date¹. The Government said it is unable to provide a precise estimate of consumer savings, because comparable data from other BNPL providers is not available and credit card interest rates vary¹.

Why it matters for households

People using buy now pay later to spread the cost of purchases will see the firms behind those products brought under FCA oversight from 15 July 2026¹. For households buying from tradespeople and other businesses that sell in the home, the position differs: those suppliers would have needed regulatory approval for credit broking, or entry to the transitional regime, to keep offering BNPL as a payment option¹. The planned amendment announced on 16 June would remove that requirement for BNPL only; these businesses would still need regulatory approval to offer other forms of regulated credit¹. The Government's stated concern was that, without the exemption, many merchants would withdraw BNPL as a payment option because of new compliance costs, and consumers would lose interest-free ways of spreading costs¹. The assessment notes that customers who could not use BNPL might instead use debit cards, bank transfers or interest-bearing credit cards, and that debit cards and bank transfers settle immediately and do not let consumers spread costs¹.

What happens next

The measure in the de minimis impact assessment comes into force on 3 December 2025¹. The new BNPL regime begins on 15 July 2026¹. A review must take place every five years, with the first review report due in July 2030¹. The Government has said it will review the approach to domestic premises suppliers with industry and the FCA¹.