Regulation Day is a start line for lenders, not a finish. From 15 July 2026, the interest-free instalment credit the market calls Buy Now Pay Later becomes regulated “deferred payment credit”, and the firms that built the sector face a compliance bill they are only now counting. The mechanics of the Financial Conduct Authority’s regime, not the headline, decide who is ready: what lenders must do differently, what shoppers can now claim, and where the pressure sits for the FTSE-listed banks and fintechs that piled into the space.
What is actually being regulated
The FCA is not regulating “BNPL” as a brand. It is regulating a defined product it calls deferred payment credit (DPC): interest-free credit repayable in 12 or fewer instalments over 12 months or less, currently exempt under the Consumer Credit Act 1974. The final rules landed in Policy Statement PS26/1 on 11 February 2026, the FCA’s feedback to its earlier consultation CP25/23.
The scope carve-out is deliberate and consequential. Merchant-provided credit (a retailer lending on its own account) stays exempt, following the government’s 2024 decision. The regime is aimed squarely at the third-party lenders that dominate the market: the Klarnas and Clearpays whose growth has outrun the rulebook. The FCA’s own figures put usage at 10.9 million UK adults (one in five) in the year to May 2024, in a market that swelled from £0.06bn in 2017 to more than £13bn by 2024.
The transition runs through a temporary permissions regime
The most important date after 15 July is the one before it. Firms already carrying on DPC business can register for a temporary permissions regime (TPR) between 15 May and 1 July 2026. Registration buys a firm the right to keep lending after Regulation Day while it prepares a full authorisation application, but it does not buy a grace period on conduct.
This is the mechanic lenders most often misread. TPR firms must comply with most FCA rules from Regulation Day itself, including the Consumer Duty, not from the date their authorisation is eventually granted. Firms then have six months from Regulation Day to submit a full authorisation application. The one meaningful carve-out on timing is the Senior Managers and Certification Regime, which only bites once full authorisation is granted, giving firms a runway on individual accountability but not on outcomes.
Affordability becomes a per-transaction obligation
The substantive conduct change is creditworthiness. DPC lenders must run affordability checks on every agreement, including those under £50, rather than waving through small tickets. The FCA has held to an outcomes-based rather than prescriptive approach: firms may apply proportionate assessments where there is no material affordability risk, but the obligation to assess does not disappear because the basket is cheap. For a product engineered around frictionless, sub-£100 impulse purchases, embedding a proportionate affordability gate at the point of sale is a design problem as much as a compliance one.
Section 75 arrives, and so does joint liability
The protection consumers will notice first is Section 75 of the Consumer Credit Act. Once agreements are regulated, BNPL lenders become jointly and severally liable with the retailer where a purchase is faulty, misdescribed or never arrives. In practice that means a shopper who splits payment on a defective item can claim against the lender, not only the merchant. Section 75’s familiar thresholds (single items priced over £100 and up to £30,000) bring a chunk of BNPL spending within reach of a claim, and hand lenders a chargeback-style exposure they have not had to price before.
A bespoke disclosure regime, not bolted-on CCA forms
The FCA has resisted simply dropping the full weight of the Consumer Credit Act onto a product it was never written for. Several CCA information requirements, covering pre-contract disclosure, the prescribed content of agreements, and the arrears statements and notices of sums in arrears, are being disapplied for DPC and replaced with bespoke rules drawn from the Consumer Duty. The intent is proportionality: disclosure sized to a four-instalment purchase rather than a car loan.
Three changes from the consultation draft signal where the FCA sharpened the rules after feedback: revised key product information requirements, mandatory signposting to free debt advice in defined circumstances, and clearer disclosure around missed payments. Together they aim at BNPL’s core consumer harm: people rolling up multiple invisible instalment commitments and only discovering the cost when a payment is missed.
Complaints, redress and the ombudsman exposure lenders inherit
With deferred payment credit inside the Financial Ombudsman Service’s remit, the firm-side consequence is an open-ended liability: disputed instalments, affordability decisions and hardship cases can be escalated to an independent adjudicator whose rulings lenders cannot appeal on commercial grounds. Over time those decisions accrete into a body of precedent that defines what “good” looks like in practice, and each upheld complaint carries a case-handling fee and remediation cost that BNPL P&Ls have never had to model. Combined with the Consumer Duty’s outcomes lens, the effect is to push BNPL from a growth-at-all-costs product culture toward one that has to evidence fair treatment, affordability and support for customers in difficulty.
Why this is a supervisory reset, not a box-tick
The FCA has been explicit that it wants the sector to survive the transition: its stated aim is a BNPL market that thrives while ensuring no one is lent to who cannot afford to repay. That is the tension the regime encodes for lenders: preserve a product 10.9 million adults use, while proving on a per-agreement basis that each of those users could afford what they borrowed.
For lenders, the near-term work is operational: register for the TPR before 1 July, stand up per-transaction affordability, rebuild disclosure to the bespoke standard, and wire in Section 75 and FOS handling. For the banks and payment firms that treated BNPL as a low-friction acquisition channel, 15 July reframes it as a regulated credit line carrying Consumer Duty obligations, ombudsman exposure and joint liability. The blind spot is closing; the compliance bill is only now being counted.
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