The UK government has brought Buy Now Pay Later (BNPL) lenders under the supervision of the Financial Conduct Authority (FCA), marking a shift from a largely unregulated service to a formally supervised credit product. This change, effective from mid-2026, extends stronger consumer protections to more than 10 million shoppers who use deferred payment services for purchases.

Under the new regulatory framework, BNPL products classified as Deferred Payment Credit—interest-free credit repaid in 12 or fewer instalments within one year—must now be authorised by the FCA. This means companies offering BNPL financing must conduct thorough affordability and creditworthiness checks before approving borrowers, reducing the likelihood of quick, frictionless credit approvals at checkout.

The new rules include access to the Financial Ombudsman Service for consumers in disputes and the application of section 75 protections under the Consumer Credit Act, which safeguards buyers if something goes wrong with their purchase. Lenders are also required to clearly communicate the risks, obligations, and rights associated with their BNPL products, enhancing transparency in the sector.

This regulatory shift follows years of pressure to oversee the rapidly expanding BNPL market. The FCA had advocated for this inclusion since the Woolard Review in 2021, and consultations with businesses and consumers showed broad support for bringing deferred payment credit into a formal regime. Government ministers framed the move as a balance between protecting consumers from unaffordable borrowing and allowing the sector to innovate and grow responsibly.

However, the regulations apply primarily to lenders providing Deferred Payment Credit for merchant transactions and exclude merchants offering their own credit arrangements directly or brokers facilitating BNPL agreements. This delineation limits the FCA’s direct oversight to the lending side, leaving some parts of the BNPL ecosystem outside the regulator’s reach.

Practical consequences for consumers are likely to include more frequent credit assessments, which could delay transactions or result in declined applications—especially for those with weaker credit profiles or stretched finances. While this reduces the ease of instant approvals, it aligns BNPL products with traditional consumer credit, emphasizing responsible lending practices over convenience.