The UK’s Financial Conduct Authority (FCA) has announced plans to strengthen protections for buy now, pay later (BNPL) borrowers starting next year.
After prolonged discussions, the government revealed its intentions in May to address what it deems the “wild west” of BNPL lending. Beginning in 2026, oversight of BNPL will transition to the FCA, which has now issued a consultation paper outlining its proposals.
BNPL has seen a surge in popularity, with FCA research indicating that one in five UK adults—approximately 10.9 million—utilized BNPL services at least once in the year leading up to May 2024, an increase from 17% (8.8 million) in 2022.
Under the FCA’s proposals, lenders will be mandated to verify borrowers’ ability to repay BNPL loans and provide assistance in cases of financial difficulty. Borrowers will also have the right to file complaints with the Financial Ombudsman Service if issues arise.
Sarah Pritchard, deputy chief executive of the FCA, stated, “We have long called for BNPL products to fall under our jurisdiction so that consumers can enjoy these options while being safeguarded. Our regulations will enable consumers to better manage their finances with affordability checks, support during difficulties, and access to essential information for informed decision-making.”
The FCA plans to rely mainly on existing requirements, such as the Consumer Duty, to facilitate growth and allow for innovation without introducing a multitude of new rules.
To ease the shift, a temporary permissions regime will be available for firms to register two months prior to the rules coming into effect on July 15, 2026. Providers will have an additional six months to apply for full authorization.
Feedback on the proposals from lenders, consumer groups, and other stakeholders is welcomed until September 26.
Madhu Kejriwal, CEO of TransUnion UK & Europe, expressed support for the initiative, noting that “Clear, proportionate regulation is essential to protect consumers while enabling innovation and access to flexible payment options. It marks an important step in the evolution and maturation of the market.”