FCA outlines new BNPL measures

The Financial Conduct Authority (FCA) has outlined new measures for Buy Now, Pay Later (BNPL) lending, which will aim to simplify information for borrowers whilst ensuring income checks and support for those in financial difficulty.

Lenders must now be authorised and comply with the FCA’s Consumer Duty, ensuring clearer information on agreements and affordability checks. Customers will receive detailed payment information and support for financial difficulties, including access to the MoneyHelper website.

The FCA says that BNPL provides an important source of credit for many, but there are currently no protections in place for those who use it repeatedly and may not be able to afford it.

Sarah Pritchard, Deputy Chief Executive at the FCA, said “We want the Buy Now Pay Later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they’re unable to repay because that could worsen their financial situation. Now parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.”

Peter Tutton, Director of Policy, Research and Public Affairs at StepChange Debt Charity, said “Today’s confirmation and detail on the regulation of Buy Now, Pay Later products are hugely welcome. It brings relief not only to us at StepChange, but to many across the sector who have long campaigned for these overdue protections.

“Buy Now, Pay Later can be a helpful way for people to spread costs. But like any form of credit, it carries risks when repayments become difficult. The absence of FCA regulation until now has only heightened the risk of financial harm for those relying on BNPL.

“Going forward people using BNPL products will be protected by affordability checks, consistent support from lenders and access to the Financial Ombudsman if things go wrong – these are all essential safeguards for borrowers using any type of credit.”

Damien Burke, Head of Regulatory Practice at Broadstone, said “The Buy Now Pay Later market has expanded substantially and is now a core part of the UK consumer credit market, particularly for younger borrowers. Many of whom have found access to short term credit (like overdrafts) more expensive or harder to access since the High-Cost of Credit Review. FCA consumer protections were an inevitable next step for a market that has had minimal formal regulation or oversight.

“Applying the Consumer Duty to BNPL should materially improve outcomes for consumers, particularly through clearer disclosures and proportionate affordability checks. For a product that is often positioned as a budgeting tool rather than credit, this regulatory reset is important in ensuring borrowers fully understand both the risks and the repayment obligations involved.

“From an industry perspective, the challenge will be implementation. Lenders will need to adapt systems, data and underwriting processes quickly, while maintaining the frictionless customer journeys that have driven BNPL’s popularity. The temporary permissions regime should help smooth this transition, but firms that are not already operating to FCA standards may find the authorisation process demanding.

“Ultimately, regulation should support a more sustainable BNPL market. Where used appropriately, BNPL can play a legitimate and positive role but these stronger guardrails provide essential checks and balances to prevent consumer harms.”