Effective 15 July 2026, Buy Now, Pay Later (BNPL) products provided by third-party lenders will come under Financial Conduct Authority (FCA) regulation, categorised as Deferred Payment Credit (DPC) products. This development represents a significant change for retailers offering BNPL at checkout, elevating standards for lenders and introducing comprehensive consumer protections.
Implications for retailers
1. FCA authorisation requirements
With DPC becoming regulated, retailers must assess whether they are engaging in this newly regulated activity. Generally, retailers referring customers to third party BNPL options will not be classified as regulated credit brokers, but exceptions exist, such as in home sales businesses, which may still require authorisation. The regulatory landscape may vary depending on the business model. Notably, retailer funded instalment plans, where costs are divided over 12 months with no interest or fees, remain exempt for now, pending further review.
2. Financial promotions
From mid 2026, any mention of BNPL/ DPC on websites or marketing platforms will constitute a financial promotion, subject to FCA oversight. These regulations extend to content authored by influencers, banners, pop-ups, emails, and SMS marketing. If you are not FCA-authorised, such communications must be approved by an authorised lending partner prior to publication.
3. Adjustments to customer journeys
The FCA will introduce dedicated rules for BNPL focused on transparency and customer comprehension. Likely requirements will include providing clear explanations at checkout regarding instalment terms, including prominent warnings on the consequences of missed payments and easy-to-understand returns processes.
Once regulated, BNPL agreements will provide consumers with both access to the Financial Ombudsman Service and protection under section 75 of the Consumer Credit Act for qualifying purchases, ensuring joint liability between retailer and lender. Given this, you should anticipate closer collaboration with your payment providers for handling complaints, refunds, and fraud prevention.
4. BNPL partnerships
Third-party BNPL lenders must apply for FCA authorisation or join the Temporary Permissions Regime. While primary compliance responsibility lies with the lender, retailers must ensure their customer journeys and financial promotions meet stringent regulatory standards. It is essential that partners commence FCA compliance preparations promptly to prevent disruptions to payment services beyond July 2026.