The UK will bring buy now, pay later (BNPL) products under formal regulation from 15 July 2026, as the Financial Conduct Authority (FCA) moves to oversee one of the fastest-growing segments of consumer credit.

The new framework will introduce stronger consumer protections and require BNPL providers to obtain FCA authorisation in order to continue operating in the UK market.

New requirements for BNPL providers

Under the rules, lenders will be required to:
 • Carry out affordability and creditworthiness checks.
 • Provide clearer information on repayment terms.
 • Offer support to customers experiencing financial difficulty.
 • Comply with FCA conduct standards, including the Consumer Duty.

Consumers will also gain the right to escalate complaints to the Financial Ombudsman Service, bringing BNPL protections in line with other regulated credit products.

The FCA has confirmed that third-party deferred payment credit agreements will become a regulated activity from the July 2026 implementation date. Firms will need to secure authorisation or enter a temporary permissions regime to continue offering BNPL products.

A rapidly growing credit segment

BNPL services, offered by providers such as Klarna, Clearpay and PayPal, allow consumers to split purchases into interest-free instalments. The products have seen rapid adoption across the UK in recent years, prompting calls for stronger oversight and clearer consumer safeguards.

The regulator said the new framework is intended to reduce the risk of consumer harm while supporting sustainable innovation in the sector.

Industry reaction

Willem Wellinghoff, Chief Compliance Officer at inclusive global payment solution provider, Ecommpay comments:

“BNPL has undeniably allowed flexible payments to be part of the payments ecosystem, but for the sector to mature, it must be built on a foundation of trust and sustainability. Ecommpay has always viewed BNPL as an important inclusive payment method for merchant growth and customer flexibility, but it must never come at the cost of consumer financial health. We, therefore, welcome this proportionate regulatory regime as a necessary step to protect consumers from over-indebtedness without stifling innovation.

“Aligning BNPL with clear standards of responsibility is a win-win: it safeguards shoppers and builds long-term confidence in the payment methods merchants offer. Ecommpay is fully supportive of the new measures from the FCA and will continue to build an inclusive payment ecosystem, with BNPL alongside other payment methods, ensuring merchants can offer flexibility that is both effective and ethical.

“Our focus remains clear - empowering merchants with inclusive payment options while ensuring their customers have the transparency and flexibility in payment methods they deserve and trust. “

Kristaps Zips, UK CEO at payabl., welcomed the move, saying the new framework would strengthen consumer protections and bring BNPL within the scope of the Consumer Duty.

“BNPL has exploded in popularity as a payment method in recent years. When used responsibly, it can support business growth while giving consumers greater flexibility to spread the cost of larger purchases.”

He added that fast, accurate creditworthiness assessments will be critical as the new rules come into force, with AI-driven analytics expected to play a key role.

“Getting this right will not only meet new regulatory expectations, but ensure BNPL continues to develop as a safe, sustainable part of the payments and credit ecosystem.”

A spokesperson at Clearpay said the announcement represents the final step toward formal regulation.

“We welcome regulation, which will establish a consistent operating environment and clear compliance standards for all providers. It will also create a more sustainable foundation for the future of BNPL. 
Clearpay research highlighted that nearly half of UK adults (48%) are more likely to use BNPL once it is regulated, and with 71% believing that it is important for BNPL to be subject to UK financial legislation, regulation will help foster trust among consumers. It will also create a more sustainable foundation for the future of BNPL, which has become an everyday payment option for consumers.”

Alexander Berrai, Deputy CEO at emerchantpay, commented:

 “The FCA’s decision to bring Buy Now, Pay Later under regulation is a necessary step for a sector that has become part of everyday payments. Proportionate affordability checks and clearer consumer information should help ensure BNPL is used responsibly and that consumers are not taking on credit they cannot reasonably repay.

“Clearer rules around credit assessments should also increase confidence among the financial institutions supporting BNPL, reducing risk and improving stability across the wider ecosystem. Over time, this provides a stronger basis for sustainable innovation and a more responsible expansion of BNPL into additional sectors and use cases.

“In the longer term, a more predictable, lower-risk environment may create better conditions for flexible repayment options for consumers, as well as more efficient pricing and improved commercial sustainability for both providers and their funding partners. While outcomes will depend on how the market develops, regulation sets an important framework.

“As a BNPL enabler, we welcome measures that prioritise consumer protection, transparency and financial wellbeing. A well-regulated environment ultimately supports consumers, merchants and the wider payments industry.”

 Chris Jones, Managing Director at PSE Consulting:

“The FCA’s announcement to bring BNPL directly within its regulatory sphere is a landmark moment for UK consumer finance. Far from stifling the market, these rules signal that BNPL is here to stay, and consumers can be confident they have the same level of protection afforded by other credit products. By introducing mandatory affordability checks, clear product disclosures, and stronger consumer support, the FCA is ensuring all BNPL actors meet the same high standards as the rest of the market. 

In the past, consumer organisations and players in the traditional banking market have raised concerns about the lack of a level playing field for consumer lending, with BNPL exploiting loopholes in regulation. This announcement should put these concerns to rest, and allow BNPL to flourish in the mainstream of consumer credit.

With the rapid arrival of AI shopping, there is a significant opportunity to engage consumers around the subject of credit in new ways. The FCA’s rules will need to evolve to ensure that all players in the consumer credit space from BNPL to traditional credit card providers have these conversations in a responsible manner. AI-powered shopping assistants have the ability to explain credit options, compare BNPL with traditional credit options, and help consumers make informed choices in real time. Consumers will need to feel that they are getting unbiased assistance in this process, and the AI platforms are not being unduly influenced by the highest bidder.”

Greg B Davies, Head of Behavioural Finance at Oxford Risk:

“Bringing buy now, pay later into the regulatory perimeter is welcome. The key risk with these products is not simply lack of disclosure, but the way they change the psychology of spending.

“BNPL works by reducing the immediate “pain of paying”. That convenience can be helpful for many consumers, but it also weakens the natural brakes that normally limit overspending. The regulatory challenge is not to overwhelm people with more paperwork, but to ensure that where behavioural risk rises, salience rises too.

“Affordability checks based purely on patchy credit histories are necessary but reactive. Behavioural signals such as repeat usage, stacking across providers, or escalating short-term commitments can indicate vulnerability earlier than traditional credit data.

“The right goal is proportionate protection: preserve flexibility for those using the product responsibly, while introducing clearer visibility and friction where patterns suggest mounting risk. That is how you protect consumers without killing innovation.

More broadly, this is a reminder that consumer harm is often behavioural rather than informational. Regulation that focuses only on disclosure will always miss part of the picture.”

Monica Eaton, Founder & CEO, Chargebacks911:

“The FCA’s decision to bring Buy Now Pay Later into regulation is a logical next step for a product that has moved from niche to mainstream in just a few years. Affordability checks and clearer consumer protections should help reduce unsustainable borrowing, which is good news for both consumers and lenders." 

"However, regulation may also change the dispute landscape. As BNPL becomes more formalised, we’re likely to see greater scrutiny around transaction policies, customer communication, and liability between lenders and merchants. Businesses offering BNPL at checkout should start preparing now, because what has traditionally been treated as a payments feature will increasingly be viewed through a regulatory and dispute-management lens.”

Tim Ranney, CEO, Congruit Inc.:

“The FCA’s new rules reinforce what many of us have seen coming — credit decisions can’t rely on static scores alone. When affordability becomes a regulatory requirement, the industry must pay attention to how consumers are managing their financial obligations in real time.”

“Creditworthiness is no longer just about the consumer's history or presence of fraud indicators.  It’s about timing, patterns, current capacity, and the consumer's intent to honor their obligations.  And the usage patterns on the consumers payment instrument(route/account, card, etc) is becoming much more important in predicting the outcome of a credit obligation.  That’s where the market is heading — not just for compliance, but for better outcomes across the board.”