"Policy update on 'Buy Now, Pay Later' financial arrangements signifies a substantial transformation in consumer credit regulations in the UK"
UK Announces Planned Regulation of Buy Now, Pay Later Products
The UK government has unveiled plans to regulate Buy Now, Pay Later (BNPL) products, marking a significant shift in consumer credit regulation. The proposed changes aim to bring BNPL lenders under the purview of the Financial Conduct Authority (FCA) and introduce a more agile and consumer-centric regulatory framework.
Phase 1 of the Consumer Credit Reform
The first phase of the reform proposes the repeal of most of the Consumer Credit Act contractual and information requirements, allowing the FCA to replace them with more proportionate rules. This move is expected to remove draconian unenforceability and disentitlement sanctions for non-compliance with prescriptive CCA requirements.
Firms operating within the Temporary Permissions Regime (TPR) will be exempt from the Senior Managers and Certification Regimes but will be subject to certain restrictions. The repeal of information requirements is anticipated to pave the way for a simpler, more agile regime that puts consumers at its heart.
Regulation of BNPL Products
Once regulated, BNPL lenders will need to conduct creditworthiness and affordability assessments before offering their products. Upon regulation, BNPL lenders will be subject to FCA rules, including the ability for borrowers to complain to the Financial Ombudsman Service and purchase protection.
The FCA has published a consultation paper (CP25/23) proposing rules requiring lenders to provide certain information both before taking out a Deferred Payment Credit (DPC) agreement and throughout its duration. The FCA intends to issue a policy statement with final rules on BNPL/DPC in early 2026.
Temporary Permissions Regime
The FCA will create a temporary permissions regime (TPR) for current BNPL lenders to operate while seeking authorization under the new regime. The TPR is expected to open two months before 15 July 2026, the date when the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 comes into effect, bringing BNPL products under FCA regulation as regulated Deferred Payment Credit agreements.
Phase 2 of the Reform
Phase 2 of the reform may involve debates on the extent to which business lending should be within the consumer credit framework. The implementing legislation will disapply certain areas of the Consumer Credit Act 1974 that were designed for longer term loans provided in a non-digital age.
The issue of maintaining legislative purchase protection under section 75 CCA for consumers versus its potential impact on innovation remains a challenge in Phase 2 of the reform. HM Treasury is taking a phased approach to consulting on wider consumer credit reform, with the first phase outlining the government's overall vision for a reformed regime.
For detailed and updated timelines specifically on the repeal of Consumer Credit Act information requirements and criminal offences, it may be necessary to consult official UK Government or HM Treasury publications or forthcoming legislative announcements beyond these July 2025 sources.
[1] HM Treasury (2025). Response to the consultation on 'buy now, pay later' reform. [Online] Available at: https://www.gov.uk/government/consultations/buy-now-pay-later-reform/buy-now-pay-later-reform-response [2] Financial Conduct Authority (2025). Consultation paper: CP25/23 - Buy now, pay later (BNPL) - Consumer credit reform. [Online] Available at: https://www.fca.org.uk/publications/consultation/cp25-23 [3] HM Treasury (2025). The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025. [Online] Available at: https://www.legislation.gov.uk/ukdsi/2025/9780111183115/pdfs/ukdsi_20250002_en.pdf
In the context of the UK's planned regulation of Buy Now, Pay Later (BNPL) products, changes might extend to regulating other financial services such as the banking and insurance sectors, creating a more comprehensive and consumer-friendly industry. Following the successful implementation of BNPL regulations, BNPL lenders will be expected to follow standard practices in the business world, including conducting creditworthiness and affordability assessments, adhering to FCA rules, and offering buyers the option to complain to the Financial Ombudsman Service. Additionally, the banking-and-insurance industry may face similar rules and regulations in the future as part of the comprehensive reform's second phase, specifically addressing business lending and legislative purchase protection issues.
