Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
FCA Review of Deferred Payment Credit Rules (BNPL)
BNPL | July 23, 2025
Image: Freepik
FCA Consultation on New Consumer Focused Rules to Regulate £13 billion BNPL sector by July 2026
On July 18, 2025, the Financial Conduct Authority (FCA) published their approach to regulating Deferred Payment Credit (DPC), otherwise known as 'Buy Now Pay Later' (BNPL), or interest free credit service if repaid in twelve or fewer instalments within 12 months.
From July 15, 2026, third party lenders that provide DPC to finance purchases must be authorised by the FCA. Merchants that offer their own DPC directly and broking activity remain outside scope.
See: UK Exempts In-home BNPL Sellers From Licensing
The FCA says its approach is proportionate and designed to reduce consumer harm without creating unnecessary burdens. It relies on the Consumer Duty to deliver good outcomes while adding specific rules where gaps exist. The aim is to build trust in DPC, support financial resilience, and promote sustainable economic growth.
Regulatory Concerns
DPC lending has expanded rapidly from £0.06 billion in 2017 to more than £13 billion in 2024. The FCA Financial Lives Survey reports that 20% of UK adults or about 10.9 million people used DPC in the twelve months to May 2024.
BNPL is growing fast and because it's been exempt from regulation, borrowers may not receive enough information before taking on debt and some lending may be unaffordable (akin to payday lenders?). The FCA notes that DPC users are more likely to be in financial difficulty than the average broader population.
Proposed Rules
- Information Disclosure - The FCA proposes that firms present key product information before an agreement is made and provide it again afterwards in a durable format that customers can store and read. Required elements include repayment amounts and dates the amount of credit late fee triggers consumer rights such as withdrawal or cancellation and whether a credit search will take place
- Creditworthiness and treatment of borrowers - Existing FCA Consumer Credit Sourcebook rules on creditworthiness (CONC 5.2A) would apply to DPC so lenders must assess whether customers can repay without harming their wider finances. The FCA links this to concerns about arrears late fees and borrower vulnerability and intends that firms provide support where customers are in or approaching financial difficulty in line with CONC 7
See: BNPL Plans Are Starting to Affect Credit in Canada
- Missed Payments and Defaults - Standardised requirements for borrower communications and fair treatment under CONC 7
- Consumer Duty - Firms must act in good faith, avoid expected harm, and support consumers to meet financial objectives throughout the journey
- Dispute Resolution - All DPC borrowers will have access to the Financial Ombudsman Service
- Data Reporting - Introduction of Product Sales Data (PSD) submissions to enable FCA supervision
Implementation Timeline
- Consultation deadline is September 26, 2025
- Policy Statement with final rules can be expected early 2026
- Regulation starts July 15, 2026
- Companies can continue operating while seeking full authorisation under a temporary permissions regime
Complete the online response form for CP25/23 or email: cp25-23@fca.org.uk
Why It Matters
The FCA's proposed rules look to reduce avoidable harm from missed payments and unclear terms while maintaining access to short term interest free credit, for those who can afford it. With 20% of the adult UK population using DPC/BNPL in the last 12 months, it's near time that the FCA's rules are in market for consultation. It is designed to boost trust and bring sustainable economic growth to the sector.
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