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The Financial Conduct Authority (FCA) has unveiled its proposed regulatory framework for the Buy Now, Pay Later (BNPL) sector, marking a major step towards formal oversight of the fast-growing lending model.
This move follows the UK government’s announcement in May to address what it described as the “wild west” of BNPL services, with formal regulatory authority set to transfer to the FCA in 2026.
According to the FCA, BNPL usage has surged, with 10.9 million UK adults—representing one in five—using the service in the 12 months to May 2024. This marks a significant increase from 8.8 million (17%) in 2022.
Under the proposed framework outlined in the consultation paper, BNPL providers will be required to assess borrowers’ affordability, offer support to customers facing financial difficulties, and ensure access to redress through the Financial Ombudsman Service in the event of disputes.
“We have long advocated for BNPL regulation to ensure consumers can benefit from the service while being adequately protected,” said Sarah Pritchard, Deputy Chief Executive of the FCA. “Our approach prioritises affordability checks, support mechanisms, and clear information, while relying on existing standards like the Consumer Duty rather than introducing extensive new rules.”
To ease the transition, the FCA plans to launch a temporary permissions regime beginning two months before the full rules take effect on 15 July 2026. BNPL providers will have six months to apply for full authorisation under the new regime.
The FCA is inviting input from lenders, industry stakeholders, consumer advocates, and the public, with the consultation open for feedback until 26 September 2025.
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