New FCA Regulation of Buy Now Pay Later: What You Need to Know

From 15 July 2026 (Regulation Day), Deferred Payment Credit (DPC) — the interest-free credit model underpinning Buy Now Pay Later (BNPL) — will be brought into the UK regulatory perimeter under the supervision of the FCA. Providers currently operating without authorisation must apply for authorisation under the Temporary Permissions Regime (TPR) before Regulation Day to avoid committing a criminal offence once the new rules come into force.

The FCA's Policy Statement PS26/1 (published on 11 February 2026) set out the final rules governing this new regime. Market participants who are active in this area (e.g. lenders and securitisation participants) must understand the implications of these changes on their business.

The Authorisation Requirement

Currently, DPC lenders do not require authorisation from the FCA. That ends on Regulation Day, after which DPC agreements will become a form of consumer credit and firms that enter into them must hold a permission under Article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 in order to do so.

Firms with an existing consumer credit permission can continue lending. Those without can use the Temporary Permissions Regime (TPR), which allows them to continue to conduct DPC activities, while their authorisation application is determined. Registration opens on 15 May 2026 and closes two weeks before Regulation Day. 

To qualify to enter into the TPR, firms must demonstrate they were conducting DPC activity on or before 15 July 2025, notify the FCA, and pay the required fee. Once registered, firms have six months to submit their full application or face automatic removal from the TPR. Crucially, TPR firms must comply with most FCA rules from Regulation Day itself, though the Senior Managers and Certification Regime will only apply once full authorisation is granted.

Key Regulatory Requirements

The new regime imposes three core obligations on DPC providers.

Product Information Disclosure. Before entering any agreement, firms must prominently display "key product information" covering the customer's obligations, credit amount, payment schedule, cash price, key risks, and whether credit reference agency checks will be conducted. Supplementary details —including cancellation rights, early settlement options, and Financial Ombudsman referral rights — must be provided separately as "additional product information" to avoid overwhelming customers.

Creditworthiness Assessments. DPC lenders must conduct creditworthiness assessments for every transaction, including those below £50. However, the FCA's outcomes-based approach grants firms flexibility to apply proportionate assessments. Where no material affordability risk exists, based on lending data, credit history, or existing credit lines, detailed income and expenditure analysis may not be necessary.

Missed Payments. A new CONC 7.20 framework governs how firms must handle arrears. Lenders must promptly contact customers about missed payments, explain adverse consequences, give reasonable notice before enforcement, and signpost free debt advice. Firms are not required to notify guarantors.

The Broader Regulatory Framework

DPC providers will become subject to the FCA's full regulatory framework, including the Consumer Duty and the Principles for Businesses, Threshold Conditions, General Provisions, and Senior Management Arrangements sourcebooks.

Implications for Third Parties and Securitisations

Parties dealing with DPC lenders should verify FCA authorisation or TPR registration, assess creditworthiness policies, and confirm that all required pre-contractual disclosures have been made to borrowers.

Securitisations of DPC receivables will attract the same considerations as securitisations involving other consumer credit receivables. However, existing exemptions remain available, including the Article 60I RAO exemption permitting unauthorised special purpose vehicles to arrange for authorised servicers to manage the underlying agreements.

Preparing for Regulation Day

FCA guidance on the TPR registration process is expected before the notification window opens. Since TPR firms must achieve compliance from Regulation Day, early preparation is critical — firms should prioritise operational readiness, Consumer Duty compliance, and high-quality authorisation applications.