Regulating Buy Now Pay Later in the UK: (almost) the final instalment

Quick read

On 19 May 2025, the UK government published and laid before parliament the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 (Order) together with an explanatory memorandum.

The Order brings currently exempt interest-free Buy Now Pay Later (BNPL) products within the UK's financial services regulatory regime. BNPL products will become subject to rules to be developed by the Financial Conduct Authority (FCA).

The new regime is due to apply from mid-2026.

Background

The Order was published together with a response to the government's October 2024 consultation on draft legislation to regulate BNPL products, which followed earlier policy work. The response sets out the government's final position on BNPL regulation.

Key points

The scope of the BNPL regime will be limited to agreements offered by third-party lenders, not merchants. The government will continue to monitor the merchant-offered credit market and take action if necessary.
Once the Order is made, the FCA will have 12 months to draft, consult on, and finalise its rules for BNPL products. A consultation on FCA rules is expected shortly.
The FCA will be allowed to make rules on affordability and creditworthiness checks.
The information disclosure requirements in the Consumer Credit Act 1974 (CCA) will be disapplied. The FCA will draft rules bespoke to the nature of BNPL products.
Most merchants will not be required to have permission to undertake credit broking to market regulated BNPL products but their promotion of such products will need to be approved by an authorised person in accordance with the financial promotion regime.
Borrowers will be able to access the Financial Ombudsman Service and benefit from the protections in section 75 of the CCA.
A BNPL provider that offers a product that is also a payment service will need to comply with the Payment Services Regulations 2017 as well.
A temporary permissions regime will be in place to allow unauthorised firms to continue BNPL lending while awaiting full authorisation.

Consumer Credit reforms

Alongside publication of the BNPL legislation, the government has kicked off a consultation on the first phase of reforms to the CCA. Please see our more detailed article.