Deferred Payment Credit: the new buy now pay later rules

Buy now pay later (BNPL) became a regulated credit product on 15 July 2026. The Financial Conduct Authority (FCA) now supervises it under the formal name Deferred Payment Credit (DPC), and lenders must be authorised, run affordability checks before lending, give clear product information, and follow FCA rules on how they treat customers who fall behind¹.

The change matters because of what BNPL is: an interest-free form of credit, repayable in 12 or fewer instalments over 12 months or less¹. It is usually offered at the checkout of an online shop, with common options to pay back over three or four months ("pay in 3" or "pay in 4") or over a longer period of up to 12 months². Providers include Klarna, Clearpay, PayPal and Amazon². Until the rules started, none of this was regulated: lenders did not need to be authorised by the FCA or follow its rules¹.

The protections are not universal, and the date matters. Agreements are regulated only where the lender and the shop are different businesses, and only for purchases made on or after 15 July 2026. Anything taken out before that date stays unregulated¹. This page explains what the rules are, what they cover, what BNPL can cost if payments are missed, and where to complain or get help. For how BNPL works as a borrowing product, see the loans guide.

What Deferred Payment Credit is and how buy now pay later works

Deferred Payment Credit is the legal name the new rules give to interest-free buy now pay later. The government's impact assessment describes BNPL 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"⁴. In practice it appears at the checkout of an online shop: instead of paying the full price at once, the cost is split into instalments, usually over three, four or twelve months².

The mechanics are simple from the shopper's point of view. A third-party provider, such as Klarna, Clearpay, PayPal or Amazon, pays the shop and collects the instalments from you². Nothing is charged for the credit itself as long as the schedule is kept to. StepChange, the debt charity, describes BNPL as a form of short-term borrowing and advises thinking carefully before using it⁵.

What distinguishes DPC from other instalment credit is the combination of three features: no interest while the schedule is kept, a short term of 12 months or less, and repayment in 12 or fewer instalments¹. That profile is exactly what kept it outside regulation before 2026. An exemption in law meant these payment plans were not treated in the same way as traditional credit agreements, so they fell outside the FCA's consumer credit regime⁶. The new rules close that gap by naming the product and bringing it inside it.

The scale of use explains why the change was made. Around 14 million consumers, about 27% of UK adults, used BNPL products in the six months to January 2023⁴, and by 2024 BNPL credit was held by around 20% of adults⁷. The FCA's Financial Lives 2022 survey found that 44% of frequent BNPL users were over-indebted⁴.

Buy now pay later is now regulated by the FCA

The FCA started regulating Deferred Payment Credit, often known as buy now pay later, on 15 July 2026¹. From that date, lenders offering the product must be authorised by the FCA or hold temporary permissions, and must follow its rules¹. The statutory instrument that does this, SI 2025/859, amends the Regulated Activities Order so that certain BNPL agreements, currently exempt under article 60F(2), become regulated credit agreements within the meaning of article 60B(3)⁸. The government's explanatory memorandum to the Order states that consumers will additionally have access to a wider range of protections, including the use of the Financial Ombudsman Service for redress¹⁰.

The route buy now pay later took from an unregulated checkout option to FCA-regulated credit.

The journey to this point took more than five years. The Woolard Review, published in February 2021, first identified the problem, noting unregulated BNPL credit agreements relying on the exemption in article 60F(2) of the Regulated Activities Order¹⁴. The government launched a consultation into regulating BNPL which closed on 6 January 2022⁶. A consultation on draft legislation opened on 13 February 2023¹², and a revised draft was published on 17 October 2024, responding to feedback from the earlier round¹³. The government's consultation response came on 19 May 2025¹³, Parliament approved the plans in July 2025⁷, and the rules came into force in July 2026⁷.

The FCA also made changes of its own alongside the legislation. In July 2026 it banned interest charges on credit that customers had already paid off during interest-free loan periods¹⁵. Its rulebook now includes specific provisions for regulated deferred payment credit agreements, including a rule that when dealing with customers during the course of such an agreement, a firm should pay due regard to its obligations under the Consumer Duty¹⁶.

Which buy now pay later agreements are covered, and which are not

Not every BNPL-style agreement is regulated. The dividing line is who provides the credit.

DPC agreements are regulated if the lender and the supplier of the goods or services are different businesses¹. This covers the common case of a third-party provider such as Klarna or Clearpay lending against a purchase from an ordinary retailer. The legislation describes the scope in the same terms: the amended article 60F(7A) applies to agreements entered into on or after the regulatory commencement date which are not secured on land, where the lender and the supplier are not the same person, or where the lender purchases the goods or services from the principal supplier under a pre-existing arrangement and is also the supplier to the consumer⁹.

The practical consequence of being regulated is the set of rights that comes with it. Section 75 of the Consumer Credit Act is available on regulated agreements, so you may be able to get a refund from the lender if something goes wrong with what you have bought, the same protection you would have if you used a credit card¹. Which? reports that under the new rules BNPL shoppers will be able to make Section 75 claims, with the provider jointly liable with the retailer for purchases costing between £100 and £30,000³. The comparison of buy now pay later and credit card purchase protection sets the two side by side.

Regulated agreements also bring the regime's stated aims into effect. The government's plans for buy now pay later regulation, set out in its October 2024 consultation on draft legislation, aim to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise¹³. The change applies from 15 July 2026, and any BNPL agreements taken out before that date will not benefit from the extra protection¹⁰.

Agreements taken out before 15 July 2026 stay unregulated

The rules only bite on new agreements. The FCA is explicit: "Any DPC agreement that you have taken out before 15 July 2026 will also remain unregulated. The new protections won't apply"¹. StepChange puts the same point from the consumer's side: if you made a purchase using BNPL before 15 July 2026, these rules will not apply to you².

This means the affordability checks, the product information rules, Section 75 and Financial Ombudsman access do not attach to older agreements, even after the regime started. A purchase made on 14 July 2026 sits on the unregulated side of the line; one made the following day does not. The Financial Ombudsman Service confirms it can look at a complaint only if you took out the agreement on or after 15 July 2026¹⁷.

For older agreements, the routes that remain are the provider's own complaints process and, where payment was made by card, the chargeback scheme (covered below under complaints). The Ombudsman has noted that its avenue is not available for all products, notably buy now pay later, in the period before regulation¹⁵. Evidence given to Parliament in 2026 welcomed the fact that BNPL would come under FCA regulation in July, precisely because of this gap¹⁸.

Affordability checks before you borrow

The central change for most people is the affordability check. Under the new legislation, BNPL providers have to carry out upfront affordability checks to ensure shoppers can manage the debt they are taking on³. StepChange describes what this means in practice: for anything you buy using BNPL, a lender will carry out a credit check, to make sure you can afford the repayments².

This was the policy intention from the start. A Scottish Parliament report from June 2022 recorded that BNPL lenders would be required to carry out affordability checks to ensure loans are affordable for consumers, and that lenders offering the product would need to be approved by the FCA¹⁹. The government's October 2024 consultation restated the aims: clear information, avoidance of unaffordable borrowing, and strong rights when issues arise¹³.

What a check means for you at the checkout is a short delay and a footprint on your credit file. The check happens before the agreement is made, so a decline happens before you owe anything rather than after. This is a change from the pre-regulation position, when no such requirement existed and agreements could be opened with no assessment of whether the borrower could repay¹.

The checks sit alongside the wider aims of the regime. From 15 July 2026, lenders will check you can afford a BNPL purchase, even for smaller amounts¹⁰. The government's consultation on the draft legislation, published 17 October 2024, set out plans to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise¹³. The FCA's consumer research ahead of the Consumer Credit Act reform found consumers wanted exactly this kind of clarity from credit products, and DPC is moving into FCA regulation as part of that wider reform programme²⁰.

Late payments, fees and interest: what it can cost

Deferred Payment Credit is interest free only if you keep to the terms. If you do not make payments, or do not pay off the full amount during the set time, you will be charged interest and extra fees². StepChange notes that if you do not pay off the full amount within 12 months, interest will usually start to be added².

What can follow a missed instalment on a buy now pay later agreement.

The credit record consequence is the one most likely to outlast the debt. Missed payments on a BNPL agreement will show on your credit score and can make it harder to get credit in the future². The FCA's ban on charging interest on credit customers had already paid off during interest-free periods, in force from July 2026, limits one sharp practice in this area¹⁵.

For regulated agreements taken out on or after 15 July 2026, there are also rules on how firms must treat customers who get into difficulty. FCA guidance states that when dealing with customers during the course of a regulated deferred payment credit agreement, a firm should pay due regard to its obligations under the Consumer Duty¹⁶. Which? reports that lenders will need to offer support to customers in financial difficulty and, where appropriate, direct them to free debt advice³. What that support looks like in practice is covered in the final section of this page.

The narrow page on what happens if you miss a buy now pay later payment goes deeper on fees and credit file effects.

Why the rules changed: evidence of harm to borrowers

The case for regulation rested on evidence that a fast-growing, unregulated credit product was causing harm. The FCA's Financial Lives 2022 survey found that 44% of frequent BNPL users were over-indebted⁴. Usage was large and growing: around 14 million consumers, 27% of UK adults, used BNPL in the six months to January 2023⁴, and by 2024 BNPL credit was held by around 20% of adults⁷.

The Woolard Review in February 2021 first set out the regulatory concern, pointing to unregulated BNPL agreements relying on the article 60F(2) exemption¹⁴. A Commons Library briefing from the same period noted that the exemption in law meant these payment plans were not treated in the same way as traditional credit agreements⁶. The review's conclusion fed into the government's decision to consult, announced in 2021, with the consultation closing on 6 January 2022⁶.

The Scottish Parliament's 2022 report recorded the policy response in plain terms: affordability checks, FCA approval for lenders, and access to the Financial Ombudsman Service for borrowers¹⁹. The government's October 2024 consultation on draft legislation restated the aims as clear information, avoidance of unaffordable borrowing and strong rights when issues arise¹³. Respondents to that consultation expressed a strong desire for action and were generally supportive of the proposed regulatory regime¹³.

The final shape of the regime, in the explanatory memorandum to SI 2025/859, is that BNPL agreements become regulated credit agreements, with consumers gaining access to a wider range of protections including the Financial Ombudsman Service for redress¹⁰. The impact assessment accompanying the legislation quantified the market it would cover⁴.

Complaints and the Financial Ombudsman Service

From 15 July 2026, complaints about regulated BNPL can go to the Financial Ombudsman Service. The Ombudsman's own page on buy now pay later states: "We can look at your complaint if you took out the agreement on or after 15 July 2026"¹⁷. Which? reports the same: you will be able to escalate complaints to the FOS if you run into issues with a BNPL provider or purchase³.

The process follows the standard consumer credit route:

1. Complain first to the BNPL provider, in writing, setting out what went wrong and what you want done.
2. Wait for its final response. If none arrives within eight weeks, or you are unhappy with the response, you can bring the complaint to the Ombudsman using its complaint form²³.
3. The Ombudsman looks at the complaint and can order redress. The service is free to use.

The Ombudsman handles consumer credit complaints under the Consumer Credit Act 1974 framework²⁴. Its published complaints data shows the new category appearing: Deferred Payment Credit accounted for 11 complaints opened in the first quarter of 2026/27²⁵. The service has also been reforming how it works, outlining a next phase of service reforms in August 2026²⁵.

Where a purchase goes wrong rather than the lending, other routes may help. Section 75 on regulated agreements covers purchases between £100 and £30,000, making the provider jointly liable with the retailer³. If you paid BNPL instalments by card, chargeback may be available: it applies to debit card purchases, and to credit card purchases where the price of the goods is less than £100, but only in certain circumstances²⁶. The Financial Ombudsman has warned that chargeback lets consumers challenge and try to recover payments made using a debit or credit card, although it only applies in certain circumstances²⁷. If your card was used to service an online payment method such as PayPal, it is unlikely you will be able to use either the Consumer Credit Act or the chargeback scheme to claim from your card provider²⁸. The narrow page on complaining about buy now pay later to the Ombudsman covers the process in detail, and FSCS or Financial Ombudsman: who to go to explains the split between the two bodies.

Where to get help if you are struggling with repayments

If you cannot keep up instalments on a regulated agreement, the rules now require the lender to engage. StepChange sets out what lenders must do: contact you, show you where you can get free debt advice, and consider giving you longer to repay or removing extra fees². Which? reports the same obligation: lenders will need to offer support to customers in financial difficulty and, where appropriate, direct them to free debt advice³.

Free, independent help exists. StepChange itself provides free debt advice, and MoneyHelper, the government-backed money guidance service, publishes advice on shopping safely online and on BNPL as a form of short-term borrowing⁵. The Payment Systems Regulator's guidance for consumers on payment problems gives the same first step for payment difficulties generally: contact your account provider, for example your bank²⁹.

For unregulated agreements taken out before 15 July 2026, the lender is not bound by the FCA's rules, but free debt advice is still available on the same terms, and the provider's own complaints and hardship processes can be used. The wider debt guide covers the options, and the page on how debt advice and debt management firms are regulated explains what to check before engaging a fee-charging firm.