FCA proposes rotections to help buy now pay later borrowers navigate their financial lives

Buy now pay later (BNPL) borrowers will benefit from key protections in place for other types of lending, under proposals put forward by the Financial Conduct Authority (FCA).  

The proposals include requiring lenders to check that people can afford to repay BNPL loans and to offer support if they get into financial difficulty. They form part of the FCA's commitment to helping consumers navigate their financial lives. BNPL borrowers will also be able to complain to the Financial Ombudsman Service if something goes wrong. The rules would take effect when BNPL comes under the FCA's remit next year. 

Sarah Pritchard, Deputy Chief Executive at the FCA, said: “We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected. Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions.  

“We're mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.” 

FCA's research on unregulated BNPL found one-in-five (20%) UK adults (10.9 million) had used it at least once in the 12 months to May 2024, up from 17% (8.8 million) in 2022.  

BNPL can provide benefits for consumers by giving them access to affordable credit and offers a convenient way to spread payment for goods and services. But, as with other credit products, there are also risks and potential for harm.   

There will be a temporary permissions regime in place. This means firms will need to follow FCA rules and will be able to continue to trade before they're fully authorised.  

The FCA welcomes views from BNPL lenders, consumer groups, the wider industry and other interested parties on its proposals to help shape the final rules. The consultation is open for feedback until 26 September 2025.   

Notes to editors: 

• BNPL is a broad term which can include credit agreements that are already regulated. The proposals set out today relate to unregulated BNPL agreements, which is referred to as deferred payment credit (DPC) in the Consultation Paper. 
• The temporary permissions regime will be open for firms to register two months before the regime comes into force on 15 July 2026. Firms will then have 6 months (from the date the regime comes into force) to apply for full authorisation. 
• The Government has made legislation to bring DPC products into FCA regulation. DPC (often referred to as BNPL) refers to unregulated interest-free credit, which finances the purchase of goods or services and that is repayable in 12 or fewer instalments within 12 months or less.  
• The FCA will publish an Occasional Paper tomorrow, which finds that DPC users are, on average, younger, less creditworthy, have higher levels of unsecured debt, and more likely to be in financial difficulty compared to the UK population. They are also almost twice as likely to be in serious financial distress than the rest of the UK population. However, we do not find consistent evidence that DPC borrowing causes medium-term indebtedness.  
• The FCA's strategy sets out four priorities for the next five years, which includes supporting growth and helping consumers navigate their financial lives. 
• Despite not yet having regulatory oversight of these firms, we've already secured changes to unfair contract terms and warned firms about misleading advertising.
• Financial Lives survey data on unregulated BNPL, also referred to as deferred payment credit: 
  • Most unregulated BNPL users used it relatively infrequently, but frequency of use is increasing. For example, in the 12 months to May 2024, 1.9 million adults (17% of all users) used BNPL frequently (10 or more times in this period), up from 1.2 million (14% of all users) in 2022. In May 2024, 2% of UK adults (1.1 million) had £500 or more outstanding unregulated BNPL debt, and 11% of UK adults (5.3 million) had £50 or more outstanding – 86% had no outstanding debt.   
  • The highest rates of unregulated BNPL use included adults aged 25-34 (30% had used it at least once in the 12 months to May 2024), adults with low resilience (30%), and adults living in the most deprived areas of the UK (29%). The most common use for it in the 12 months to May 2024 was for lifestyle and beauty purchases (41%), followed by ‘treating myself or other people' (37%). 8% of those who used it in the last 12 months said they used it to cover ‘everyday essential expenses'.