The Financial Conduct Authority published its final rules for the regulation of Deferred Payment Credit on February 11, setting the stage for Buy Now Pay Later lending to become a fully regulated activity in the United Kingdom from July 15, 2026. Policy Statement PS26/1 closes what has been one of the most conspicuous gaps in UK consumer credit regulation, a gap first identified by the Woolard Review in February 2021, and brings users of BNPL products under formal regulatory protection for the first time.
Under the new regime, any firm offering interest-free credit agreements repayable in up to twelve instalments within twelve months to finance the purchase of goods or services will need to be authorised by the FCA or registered under the Temporary Permissions Regime. The TPR notification window opens on May 15, 2026, and closes on July 1. Firms that have not secured either full authorisation or TPR registration by Regulation Day on July 15 will be committing a criminal offence if they continue to enter into new DPC agreements.
The FCA will apply its existing creditworthiness rules in full to BNPL lending. Firms must establish robust policies, governance, and systems to assess affordability for every transaction, including those below fifty pounds. The regulator has acknowledged that a proportionate approach is appropriate. Where a firm determines through relevant lending data, credit history, and open credit lines that there is no material affordability risk, a full income and expenditure assessment will not be required for every transaction.
Two consumer protections that were previously unavailable to BNPL users take effect on Regulation Day. Section 75 of the Consumer Credit Act 1974 will apply to DPC agreements, making lenders jointly and severally liable with retailers for purchases between one hundred and thirty thousand pounds in cases of breach of contract or misrepresentation. For the first time, DPC users will also be able to escalate complaints to the Financial Ombudsman Service, with FOS decisions binding on firms.
The FCA has reduced the pre-contractual information requirements from its original consultation proposals. Recognising that excessive disclosure at checkout can impair rather than enhance consumer decision-making, the regulator streamlined the key product information that firms must proactively provide before consumers enter an agreement.
The regulation applies to the major BNPL providers operating in the UK market, including Klarna, Clearpay, and PayPal Pay in 3. Firms entering the TPR will have six months from Regulation Day to submit applications for full authorisation. The FCA Consumer Duty, which came into effect for open products in July 2023, extends to DPC activities from July 15, requiring firms to deliver good outcomes for consumers across product design, pricing, consumer understanding, and support.