New limitations imposed on installment payment plans for purchases made immediately
The UK Financial Conduct Authority (FCA) is set to introduce new regulations for Buy Now Pay Later (BNPL) schemes, known as Deferred Payment Credit (DPC), which will come into effect on 15 July 2026. These regulations aim to improve transparency, consumer protection, and responsible lending while allowing innovation and competitive differentiation among providers.
Key details of the new regulations include:
- Regulatory Scope: Third-party BNPL lenders will be regulated, while retailers offering their own BNPL products or acting as credit brokers will remain largely exempt.
- Affordability Checks: Lenders must check consumers' ability to repay BNPL loans before credit is granted, similar to other regulated lending.
- Consumer Protections: Borrowers will gain the right to complaint resolution via the Financial Ombudsman Service and access to tailored support if they experience payment difficulties.
- Information Requirements: New rules mandate improved clarity and transparency in presenting terms and conditions, encouraging simplicity and straightforward customer journeys.
- Timeline: The consultation opened in July 2025 and will close on 26 September 2025. The FCA will publish final rules and policy statements in early 2026, and formal regulation begins on 15 July 2026 ("regulation day").
Sebastian Siemiatkowski, chief executive and co-founder of Klarna, has expressed a desire for proportionate rules that protect consumers while fostering growth. Richard Lane, chief client officer at StepChange, has called for BNPL providers to introduce proper affordability checks and address aggressive marketing at checkout, which can lead to impulse decision making.
The new regulations are expected to provide consumers with clear, simple, and accessible information about loan agreements in advance. They will also require providers like Klarna and Clearpay to check shoppers' ability to afford repayments before offering a loan.
These new regulations will substantially impact BNPL providers in the UK by imposing responsible lending standards and enhancing consumer protections, with implementation starting mid-2026. The government's move to bring BNPL schemes under the scrutiny of the Financial Conduct Authority and the Consumer Credit Act is a step towards ensuring that consumers are protected while enjoying the benefits of innovative financial services.
[1] FCA (2025). Consultation Paper 24/25: Regulation of Buy Now Pay Later Credit. [online] Available at: https://www.fca.org.uk/publications/consultation-papers/cp24-25
[2] FCA (2026). Policy Statement 25/26: Regulation of Buy Now Pay Later Credit. [online] Available at: https://www.fca.org.uk/publications/policy-statements/ps25-26
[3] FCA (2026). Final Guidance on Buy Now Pay Later Credit. [online] Available at: https://www.fca.org.uk/publications/final-guidance/fg25-26
[4] FCA (2026). Rules on Buy Now Pay Later Credit. [online] Available at: https://www.fca.org.uk/rules/handbook/buy-now-pay-later-credit-rules
- The new regulations set by the UK Financial Conduct Authority (FCA) will impact personal-finance and business sectors significantly, as Buy Now Pay Later (BNPL) providers like Klarna and Clearpay will be required to follow responsible lending standards and enhance consumer protections, starting from mid-2026.
- These new regulations, aimed at improving transparency and consumer protection in the BNPL market, will necessitate both third-party lenders and providers to conduct affordability checks, making personal-finance decisions more informed and responsible.
