Overview
Deferred Payment Credit (DPC), commonly known as Buy Now Pay Later (BNPL), is interest-free credit which finances the purchase of goods or services, repayable in up to 12 instalments within 12 months or less. Under current regulations, lenders offering DPC do not require authorisation from the Financial Conduct Authority (FCA). However, this is due to change in July 2026.
DPC will become regulated by the FCA on 15 July 2026 (Regulation Day), meaning providers will need FCA authorisation to originate DPC agreements from that date onwards. Doing so without authorisation will constitute a criminal offence.
On 11 February 2026, the FCA published Policy Statement PS26/1 (Policy Statement), confirming the final rules for the regulation of DPC. The Policy Statement provides feedback on responses to the FCA’s earlier consultation paper, CP25/23, and outlines final changes to the proposed rules.
Authorisation
Any firm that has an existing consumer credit permission to enter into regulated credit agreements as lender, under Article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), can continue to enter into DPC agreements in reliance on that existing permission.
Firms that do not hold such permission, but who were nevertheless conducting DPC activity before the introduction of the new legislation will be able to make use of the Temporary Permissions Regime (TPR), which will allow them to continue to conduct DPC activities while their application to the FCA is determined.
For firms that already hold a Part 4A permission under the Financial Services and Markets Act 2000, this will involve an application to vary their permission to include the activities within the scope of Article 60B RAO. For firms that do not hold any regulatory permission (and therefore are not currently FCA-authorised), this will entail submitting an application for authorisation.
As proposed, registration for the TPR will open on 15 May 2026 (two months before Regulation Day) and close two weeks before Regulation Day.
Once a firm has entered the TPR, it will have six months from Regulation Day to apply for full permission, and will then exit the TPR when:
- The firm’s application for authorisation or a variation of permission has been approved;
- The FCA has issued a Decision Notice refusing the firm’s application;
- The firm withdraws from the TPR; or
- The firm withdraws its application for authorisation or a variation of permission.
If the firm does not apply for the necessary consumer credit permission within six months from Regulation Day, the firm will be removed from the TPR and will no longer be able to conduct DPC activities.
Whilst all DPC agreements entered into before Regulation Day will remain unregulated, any firm that does not have an existing consumer credit permission to enter into regulated credit agreements as lender or has not registered under the TPR will not be permitted to enter into any new DPC agreements after Regulation Day.
Firms will be eligible to enter the TPR if:
- The firm was carrying on DPC activity on or before 15 July 2025 (the initial commencement date of the government’s legislation);
- The firm notified the FCA of a desire to register for the TPR before Regulation Day; and
- The firm paid the relevant registration fee.
To register to enter the TPR, eligible firms will need to provide the FCA with evidence that they were carrying on DPC activity before 15 July 2025, as well as firm details such as the registered office, trading names, and details of the firm’s controllers and senior managers.
From Regulation Day, firms in the TPR will need to comply with most of the FCA’s applicable rules, regardless of the fact that they have not yet obtained the necessary permission to conduct DPC activity. However, a small number of rules will be disapplied for the TPR period. For example, the Senior Managers and Certification Regime (SMCR) will not apply to firms in the TPR that are not authorised for any other regulated activities. The SMCR will only begin to apply to these firms when they no longer hold a temporary permission.
Provision of product information
Before entering into an agreement with a customer, DPC firms will be required to provide “key product information” in a prominent way and make “additional product information” available.
Key product information must include:
- The customer’s obligations under the agreement
- The amount of credit to be provided under the agreement
- The number, frequency, and amount of payments to be made under the agreement
- The cash price of the goods and/or services that the agreement is financing
- The key risks of the product
- Whether the firm will (where known), or otherwise may, obtain information from a credit reference agency
- An indication that information about certain other rights will be set out in the additional product information
Following previous consultations, the FCA will no longer require firms to include in the key product information any explanation of what a continuous payment authority is, or to outline the existence of any rights to withdraw or cancel the agreement, to finish payments ahead of time, or to refer a complaint to the Financial Ombudsman. This information must now be included in the additional product information section instead. The intention is to ensure that consumers are not overwhelmed with information, as this could limit their ability to make informed decisions.
Creditworthiness assessments
DPC lenders will also need to comply with the creditworthiness rules under the Consumer Credit Sourcebook (CONC) 5.2A, meaning that they will need to undertake a creditworthiness assessment for each DPC transaction, including those of less than £50 in value.
The Policy Statement reiterates that these rules are outcomes-based and offer firms flexibility to apply their own judgement to determine whether there is a material affordability risk and what constitutes a proportionate approach to creditworthiness and affordability assessments in the customer’s circumstances. For example, if a firm determines it to be obvious that there is no material affordability risk (for example, by relying on relevant lending data, credit history, and open credit lines), the firm will not be required to assess income and expenditure.
Approach to missed payments
As proposed, a new CONC 7.20 will be introduced to outline the rules relating to missed payments by customers. As a result, DPC firms will now be required to contact customers about missed payments as soon as possible. However, firms will not be required to notify any guarantors.
When a missed payment has occurred, lenders should also provide the borrower with adequate information on the adverse consequences that will arise from the late payment and any other adverse consequences that the firm believes are likely to arise out of the missed payment. However, the FCA has clarified in the Policy Statement that this does not require firms to explain all potential future consequences of a missed payment.
Firms must also provide reasonable notice before terminating or taking steps to enforce an agreement, and signpost free and impartial debt advice and the benefits of accessing it.
Application of a wider Handbook
The Consumer Duty, focusing on good outcomes for retail customers, remains a key part of the FCA’s approach to DPC regulation, as well as CONC. The wider Handbook will also apply to DPC lenders as proposed, including:
- The Principles for Businesses sourcebook (PRIN), which contains fundamental high-level obligations that FCA-regulated firms must meet at all times, including the Consumer Duty.
- The Threshold Conditions sourcebook (COND), which sets out guidance on the requirements that firms must satisfy to become and remain authorised by the FCA.
- The General Provisions sourcebook (GEN), which outlines the administrative duties that apply to FCA-regulated firms.
- The Senior Management Arrangements, Systems and Controls sourcebook (SYSC), which explains how FCA-regulated firms must organise and manage their affairs.
Implications for parties dealing with DPC lenders
Third parties dealing with DPC lenders should be mindful of the described changes and conduct appropriate due diligence to ensure that DPC providers have the necessary FCA authorisation (or TPR registration), have appropriate creditworthiness assessment policies and procedures in place, and suitably provide the required pre-contractual information to all borrowers before entering into agreements.
Implications for securitisations
BNPL or DPC will now fall within the definition of a “regulated credit agreement” and therefore entering into one, or exercising a lender’s rights under one, will be within the scope of Article 60B RAO. This will mean that, for securitisations of receivables under DPC or BNPL agreements, similar considerations will apply to those that need to be borne in mind when securitising any other type of consumer credit receivables. At the same time, market participants will be able to avail themselves of the same exemptions that apply in that context. For example, the exemption at Article 60I RAO, which allows an unauthorised person to arrange for an appropriately authorised person to service regulated credit agreements on behalf of that unauthorised person, should still be available to the special purpose vehicle purchaser in connection with securitisations of receivables under DPC or BNPL agreements.
Next steps
The window for TPR notifications will open on 15 May 2026, two months before Regulation Day. The FCA has promised to publish directions on the process for TPR notification ahead of 15 May 2026, specifying the way in which a firm will need to notify the FCA of its desire to be registered under the TPR and the information it will need to provide.
As DPC providers in the TPR will need to comply with the FCA’s rules from Regulation Day, firms should commence preparations for the regime early to ensure operational readiness from July 2026. In particular, firms should ensure that they are ready to be fully compliant with the Consumer Duty and the rest of the Handbook, and to fully engage with the authorisation process in preparing high-quality applications to the FCA.
Client Alert 2026-048