BNPL to come under FCA regulation

Buy Now Pay Later (BNPL) will come under Financial Conduct Authority (FCA) regulation in July, according to written evidence submitted to the Treasury Committee by the Centre for Responsible Credit (CfRC)¹. The charity, which describes itself as working to improve how credit is provided to lower income households, said it welcomed the change¹.

The submission argues that the forthcoming rules may not go far enough. It says the Government's Financial Inclusion Strategy places emphasis on a "balance" between inclusion and protection, and that this "overlooks the systemic vulnerability of borrowers who rely on credit out of necessity"¹. It adds that "current affordability frameworks are unlikely to offer adequate protection"¹.

The evidence sets out how widely credit is used by lower and middle income (LMI) households. A CfRC survey of more than 3,400 consumers in the lower half of the income distribution in Great Britain found that around three-quarters (74%) use consumer credit products¹. Within that group, 56% use credit cards, 22% overdrafts, 21% BNPL and 10% personal loans, often in combination¹. The FCA found that 79% of all adults had access to some form of regulated credit in 2024¹.

The submission also reports financial pressure among this group. It says 28% of LMI adults, around 7.5 million people aged 18 and over, are unable to cover their basic daily expenses every month, and that 44%, about 11.7 million adults, seldom have money left at the end of each month¹. Among those unable to meet basic needs, 45%, or 3.4 million people, are using credit to pay for food and bills, while 18% are borrowing to pay previous debts¹.

The CfRC submission also covers other areas of consumer credit. It says the maximum Budgeting Loan is based on 15% of the Universal Credit standard allowance, reduced from 25% in April 2025¹. It notes that interest-free Crisis Loans from the Social Fund were discontinued in 2013, when their budget moved to local authority welfare programmes¹. It cites its role in past reforms including cost caps on payday lending in 2015 and rent-to-own stores in 2019¹.

Why it matters for households

BNPL agreements have sat outside full FCA regulation, so consumers using them have not had the same protections as those taking out credit cards or personal loans. The submission states that regulation is due in July¹, which would bring the sector within the FCA's rules. The CfRC's position is that the change is welcome but that the affordability framework attached to it may still leave borrowers exposed¹.

The evidence indicates the scale of reliance on credit among lower income households: 21% of those surveyed use BNPL, and 45% of those unable to meet basic needs use credit for food and bills¹. For households in that position, the practical effect of regulation depends on what affordability checks lenders are required to apply, which the submission says is not yet settled¹.

Separately, the submission states that the maximum Budgeting Loan is now 15% of the Universal Credit standard allowance, down from 25% in April 2025¹. That change affects the amount claimants can borrow through the scheme.

What happens next

The submission does not set out a timetable beyond stating that BNPL regulation is due in July¹. It calls for stronger affordability regulation and enforcement, reform of credit reporting, expansion of low-cost and interest-free credit, better access to debt advice, modernisation of personal insolvency rules, and obligations on mainstream banks to provide equitable access to affordable credit¹. No further dates for those proposals are given in the evidence.

For background on how the rules work, see Is buy now pay later regulated by the FCA?, Deferred Payment Credit: the new buy now pay later rules and Buy now pay later explained: how it works, late fees and your rights. The wider framework is covered in Financial regulation in the UK: who makes the rules and how changes affect you and Who regulates what: FCA, PRA, Bank of England, PSR and The Pensions Regulator.