The Financial Conduct Authority published consultation paper CP25/23 on 18 July 2025, setting out proposed rules and guidance for buy now pay later lenders1. The FCA is expected to issue its policy setting out final rules in early 2026, with regulation coming into force on 15 July 20261.
Regulation will be limited to agreements offered by third-party lenders. Agreements provided directly by merchants will continue to be exempt from regulation1. The temporary permissions regime will open for firms to register two months before 15 July 2026, and firms will then have six months from that date to apply for full authorisation1.
The total value of BNPL transactions in 2024 was £13.8 billion, up from £1.2 billion in 20191. FCA analysis cited in the consultation describes BNPL users as, on average, younger and less creditworthy, with higher levels of unsecured debt, and almost twice as likely to be in serious financial distress compared to the wider UK population1. Research from Citizens Advice cited in the paper shows that nearly a third of BNPL users who were due to make a payment borrowed money to repay their instalments1.
On creditworthiness, the FCA states in CP25/23 that there could be a reduction in BNPL transactions due to firms needing to undertake creditworthiness assessments, and that firms should assess the potential impact applying CONC creditworthiness rules may have on origination volumes and arrears rates1. Lenders will be subject to the Consumer Duty1. The FCA is proposing better data reporting by firms, including Product Sales Data and customer outcomes, and plans to consult later this year on a mandatory reporting requirement for BNPL lenders to report to Credit Reference Agencies1. Lenders do not currently have to report to CRAs1.
On information, the FCA will not impose new prescriptive rules for in-life disclosures, but firms are encouraged to use channels such as SMS, push notifications and emails to notify customers of upcoming or missed payments1.
"Regulation will be limited to agreements offered by third-party lenders. Agreements provided directly by merchants will continue to be exempt from regulation."
On complaints, consumers will be able to access the Financial Ombudsman Service1. Every complaint to the FOS over the first three complaints per financial year generates a case fee of £650 once the FOS confirms it will take the complaint on, which may vary depending on the outcome and whether the complaint was referred by a professional representative1. A case fee for professional representatives was introduced from 1 April 20251.
Section 75 of the Consumer Credit Act will apply to newly regulated BNPL agreements, making BNPL lenders jointly and severally liable with the retailer, so consumers will be able to claim refunds from their lender if a product is faulty or does not arrive1. These rights apply to purchases over £100, and many firms facilitating retail payments voluntarily offer protection for lower value purchases1.
Why it matters for households
BNPL agreements taken out with third-party lenders are set to be covered by FCA rules from 15 July 2026, while agreements provided directly by merchants remain outside regulation1. For affected borrowing, consumers would gain access to the Financial Ombudsman Service and to Section 75 refund rights on purchases over £100, with lenders jointly and severally liable alongside the retailer1. Creditworthiness checks under CONC rules would apply, and the FCA states in CP25/23 that this could reduce BNPL transaction volumes1. Whether BNPL borrowing appears in credit files could change: lenders do not currently have to report to Credit Reference Agencies, and the FCA plans to consult later this year on a mandatory reporting requirement1. The FCA has not published final rules; those are expected in early 20261.
What happens next
The FCA is expected to issue its policy setting out final rules in early 20261. The temporary permissions regime opens for firms to register two months before 15 July 2026, after which firms have six months from 15 July 2026 to apply for full authorisation1. The FCA also plans to consult later this year on mandatory reporting to Credit Reference Agencies1.
The consultation process is how proposed rules become final. The FCA's regulation of buy now pay later is the subject of CP25/23, and the providers named in the market include Klarna, Clearpay and PayPal. Complaints about financial firms can go to the Financial Ombudsman.
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