Regulatory Influencer: The FCA’s BNPL Rules to Reshape the Instalment Credit Market in the UK

In February 2026, the UK’s Financial Conduct Authority (FCA) published policy statement PS26/1, setting out the final regulatory framework for deferred payment credit (DPC) (also known broadly as buy now, pay later (BNPL) lending), following consultation under CP25/23. The policy statement confirms the FCA’s approach to bringing previously unregulated short-term, interest-free instalment credit within the formal consumer credit perimeter. 

The final rules reflect industry feedback and clarify how DPC products will be integrated into the FCA Handbook and aligned with existing conduct, creditworthiness and Consumer Duty requirements. 

The reforms were introduced after the FCA acknowledged that most BNPL activity has been operating outside its direct supervision and beyond the full scope of the Consumer Credit Act 1974. 

The core challenge for BNPL providers now lies in reconciling their traditionally frictionless, embedded checkout model with a more rigorous compliance architecture. Under the finalised rules, BNPL providers will have to redesign credit decisioning processes and update technology infrastructure. If implemented strategically rather than reactively, the new rules can become a competitive advantage for BNPL providers through the preparation measures listed throughout this regulatory influencer. 

Temporary Permissions Regime

Firms wishing to continue offering DPC services once the new regulatory framework takes effect must register under the Temporary Permissions Regime (TPR) before July 15, 2026 and pay a registration fee of £280. The FCA will supervise firms operating under temporary permission and monitor their compliance as part of the authorisation and supervisory process. Registered firms will be listed on the FCA website and will clearly disclose in their communications that they hold temporary permissions. 

Firms that choose not to register under the TPR can continue servicing pre-existing agreements, but cannot initiate any new ones after July 15, 2026. 

It will be considered a criminal offence to enter into such agreements without permission from this date. 

Key product information 

The FCA has refined its disclosure framework for DPC agreements by narrowing the scope of what must appear in the “key product information” provided before a DPC agreement is entered into.

Under the final rules, information on withdrawal and cancellation rights, early repayment rights, referral of complaints to the Financial Ombudsman Service (FOS) and explanations of continuous payment authorities has been moved out of the core “key product information” section of the information disclosure given by providers to consumers, and into “additional product information”. This information should still be provided or made available before the agreement is concluded.

Information that shall be included in key product information includes: 

• Amount of credit to be provided under the agreement. 
• Number, frequency and amount of payments to be made under the agreement. 

• Cash price of the goods and/or services that the agreement is financing. 

  However, BNPL providers must include a clear statement within the key product information directing consumers to where details of these rights can be found in the additional product information. The FCA has made these adjustments to ensure that the key product information remains focused on the most decision-critical content, while still preserving access to broader consumer rights information prior to contract formation. 

Challenges BNPL providers could face: 

• Unlike traditional lenders, BNPL providers often operate within merchant checkout flows. This creates challenges around ensuring the key product information is displayed consistently across thousands of merchant integrations. Regulatory responsibility remains with the BNPL provider, even if the merchant interface introduces risk. 
• BNPL platforms that auto-generate repayment schedules and pricing must ensure that all key product information elements populate accurately. 
• Now within the scope of the FCA’s Consumer Duty, BNPL providers will be obliged to demonstrate that all customer communications support informed decision-making and are in the best interest of the customer. The amendment’s intent increases scrutiny on what providers deem most important and whether rights in the additional information section are sufficiently accessible. Providers must be prepared to explain the logic behind user experience design decisions.  

In preparation, compliance teams could: 

• Map the final FCA requirements to identify gaps between the existing key product information of the provider and the final rule positioning of key product information.
• Produce a compliance memo that is ready at hand if the FCA requests it, demonstrating that all decision-critical content has been included in the “key product information” section, and document how the disclosure design delivers good customer outcomes under the Consumer Duty.
• Conduct thematic testing of merchant journeys to confirm key product information is displayed before the agreement is entered into. 

In preparation, product teams could: 

• Ensure that the information that has now been added to the additional product information section is no longer explicitly stated in the key product information section; instead, references to where to find this information should be included. 
• Reconfigure checkout screens so key product information appears prominently before the agreement is concluded. 
• Implement automated checks to prevent merchant-side alteration of key product information formatting. 

In preparation, legal teams could: 

• Redraft consumer-facing documents to reflect key product information and additional product information structure. These documents can include terms and conditions and a pre-contract information pack.
• Review the wording for precision on withdrawal rights, early repayment and FOS access to ensure the consumer is fully informed. 
• Amend merchant contracts to: 

1. Prohibit the alteration of mandatory disclosures. 
2. Allocate responsibility for display integrity. 
3. Allow audit rights over checkout presentation. 

BNPL has historically faced criticism around transparency, over-indebtedness and regulatory arbitrage, as suggested by Sarah Pritchard, the deputy chief executive at the FCA, and in the FCA’s Woolard Review. By clearly structuring key product information around decision-critical content, firms can reduce customer confusion, post-purchase disputes and complaints linked to the misunderstanding of repayment terms. 

BNPL providers that reduce friction and improve transparency are likely to see stronger customer lifetime value because they build trust with customers. 

Missed payment notices 

The FCA has clarified its approach to communications with borrowers who miss payments. Although the proposed rules required providers to explain the immediate or future adverse consequences of a missed payment, the final position does not require providers to set out every possible future consequence. Instead, BNPL providers must provide sufficient information about any adverse consequences arising from the missed payment, as well as any other adverse consequences they consider likely to occur. 

The intention is to ensure that communications are proportionate and tailored to the borrower’s specific circumstances, rather than overwhelming the consumer with exhaustive or irrelevant information. 

Before terminating or enforcing terms of an agreement, BNPL providers must signpost free and impartial money guidance and debt advice to support good consumer outcomes. 

Challenges BNPL providers could face: 

• The shift away from listing all potential consequences introduces discretion and creates interpretative risk. 
• BNPL providers relying on standardised arrears templates may need system upgrades to ensure communications remain proportionate and accurate on a case-by-case basis. 
• Aiming to avoid overwhelming consumers creates tension in that too little information may be seen as insufficient transparency, and too much information may be seen as confusing or disproportionate. BNPL providers must demonstrate that their approach is calibrated and outcome-focused. 

In preparation, compliance teams could: 

• Create decision trees for when consequences such as credit file reporting, late fees, account suspension or collections escalation become “likely”. 
• Develop written guidance defining what constitutes adverse consequences arising from the missed payment or likely to arise, for the benefit of customer-facing teams. For example, credit reporting may become likely when the customer is 30 days past due and has no active repayment plan in place. 

In preparation, product teams could: 

• Embed debt advice triggers in workflows. For example, before the termination stage, the system must auto-insert FCA-compliant debt advice signposting. 
• Move away from static messaging templates and replace generic wording with dynamic inserts. For example, if a late fee is applied, the wording should say “A £X late fee has been added.” As a result, the arrears messaging engine will require conditional logic. 

In preparation, reporting teams could: 

• Track real behaviour through monitoring the percentage of customers who make missed payments, after the first tailored notice, the complaint rate for arrears messaging and FOS referrals linked to missed-payment communications. 
• If the data shows confusion, the communications will not be proportionate and will trigger remediation. 

Tailored, proportionate arrears communications can improve early-stage cure rates, and this directly reduces expected credit losses. In high-volume, short-term BNPL portfolios, earlier engagement lowers the probability of accounts reaching charge-off or external collections. 

By embedding debt advice signposting and proportionate messaging, BNPL providers can position themselves as responsible lenders rather than opportunistic credit providers. In regulated credit markets, responsible treatment of customers in difficulty correlates with stronger long-term retention.

Creditworthiness assessments

The FCA will apply the creditworthiness rules in CONC 5.2A to BNPL providers, including for amounts under £50. The rules are non-prescriptive and allow providers flexibility to use their own judgement in assessing material affordability risk. Some key considerations for providers may include credit history, lending data and the use of available headroom across credit lines. 

For many consumer credit lenders that fell under the Consumer Credit Sourcebook from 2014, it became clear that many lenders had not embedded affordability assessments adequately compared to the FCA’s expectations. In 2015, the FCA subsequently published guidance on creditworthiness and affordability assessments, which highlighted the common misunderstandings among credit providers. In 2018, the FCA issued a “Dear CEO Letter” due to the increase in complaints regarding unaffordable lending. Lenders were advised to assess their lending activity and to determine whether creditworthiness assessments were compliant. In the same year, the FCA published PS18/19, clarifying its expectations for affordability assessments and highlighting their importance. 

A number of lenders were required to undertake large-scale remediation programmes to reassess historic lending and provide redress. In some cases, this forced lenders to exit the market following this regulatory scrutiny. 

Challenges that BNPL providers may face: 

• Non-prescriptive rules create supervisory risk through inconsistent market approaches and interpretative variation. In 2014, many lenders were compliant until FCA supervision and FOS complaints indicated otherwise. The risk for BNPL providers is similar, where affordability may appear proportionate internally, but could later be judged as insufficient in practice. 
• In 2014, lenders struggled because their operational models were not designed to withstand regulatory scrutiny, as they were mainly focused on credit risk and lacked robust audit trails for decision-making. The challenge for BNPL providers lies in embedding compliance without undermining commercial speed and frictionless journeys.  
• There is a cultural shift from BNPL being a payment product to a regulated form of credit. Some BNPL providers have operated within a fintech or payments culture rather than a traditional consumer credit risk culture. The stronger governance expectations, clear audit trails and documented affordability frameworks may be difficult to adjust to. 

In preparation, compliance teams could: 

• Document a clear affordability policy setting out: 

1. Decision criteria. 
2. Escalation triggers. 
3. Enhanced checks for repeat users. 

• Define transaction-level thresholds in internal policies, such as the maximum number of concurrent plans. 
• Review historic lending data to identify potential red flags, such as repeat borrowing, missed payments and rollovers. 

In preparation, reporting and risk teams could: 

• Build a dashboard that tracks repeat borrowing patterns, cumulative risk exposure across transactions and vulnerability indicators. 
• Develop early-warning indicators for potential affordability deterioration and ensure staff are well-versed in them. 

In preparation, product teams could: 

• Review checkout journeys to ensure affordability checks are embedded without relying solely on soft credit checks. 
• Ensure systems can assess overall and holistic risk exposure, not just per-transaction risk. 

As retailers operate under heightened consumer protection expectations, they become sensitive to the conduct risk profile of embedded credit partners. A BNPL provider that can demonstrate low complaint rates, disciplined affordability governance and clear outcome monitoring is less likely to transmit risk to retailers. When losses are lower and more predictable, the providers look safer for investors who provide funding, which directly improves profit margins.  

Access to the Financial Ombudsman Service 

For the first time, BNPL users will be entitled to escalate complaints to the FOS. This will not be expanded to the FOS’ Voluntary Jurisdiction to cover BNPL activities by a respondent from a European Economic Area or Gibraltar establishment.

Complaints that can be escalated include disputes around: 

• Misleading information. 
• Incorrectly applied fees. 
• Affordability concerns. 
• Poor support during financial difficulty. 

To maintain proportionality, firms in the TPR do not need to report complaints until they become fully authorised by the FCA. Complaints accrued during this period must be included in the first report post-authorisation. 

Additionally, the FCA will not be extending the Financial Services Compensation Scheme, as it would be of limited benefit to BNPL customers. However, consumers may be able to obtain refunds directly from the provider, as Section 75 of the Consumer Credit Act now applies to BNPL providers. 

Challenges a BNPL provider may face: 

• The BNPL model is optimised for seamless user experience journeys. The FOS scrutiny requires clear audit trails for each transaction, evidence of proportional affordability assessments and a rationale for approving repeat transactions. If underwriting logic is highly automated and minimally documented, providers may struggle to defend decisions months later. 
• A large transaction base, combined with high-frequency usage, could mean a substantial complaint backlog at the point of authorisation. This could attract early supervisory attention.

BNPL providers must now assume that every individual checkout decision, marketing screen, late fee and collection interaction could be independently reviewed by the Ombudsman months later. 

In preparation, compliance teams could: 

• Define exposure thresholds in the policy that include the maximum total outstanding balance per customer, the number of instalment plans, transactions in a rolling 30-day period and escalation triggers. Documented thresholds demonstrate proactive monitoring, rather than reactive, where no thresholds exist. 
• Introduce a repeat use dependency review policy where customers who have used the BNPL product consistently for three to six months have no repayment months and roll from one plan to another. Compliance teams shall mandate periodic reviews of these cohorts. 

In preparation, customer-facing teams could: 

• Track behavioural signs such as multiple payment reschedules, requests to change repayment dates frequently and partial payments across plans. In the case that such behaviour demonstrates payment difficulty, this should trigger outreach rather than further lending. 

In preparation, product teams could: 

• Ensure that customers are well informed when making a decision to proceed with the credit, whether that be on the app or website, as BNPL’s risk exposure is heavily tied to checkout user experience. 
• Ensure, for example, that the total outstanding exposure is displayed before confirming a new purchase, which requires customer acknowledgement before proceeding. 

Key dates 

The FCA has confirmed that the TPR for BNPL providers will open on May 15, 2026 and close two weeks before regulation day (July 15, 2026), meaning there is only a short window to register. A BNPL agreement taken out before this date and merchants that offer their own deferred payment credit agreements will remain unregulated. 

Following regulation day, firms in the TPR will have six months to submit an application for full authorisation to the FCA. 

PS26/1 Wrapped

In conclusion, BNPL providers should treat the finalised rules as a full operating model reset. Firms that act early to map changes against their current processes, redesign key product information and outline clear thresholds or escalation triggers, will be significantly better positioned at the full point of authorisation. Equally important is investing in monitoring systems that track cumulative risk exposure, repeat borrowing patterns and complaint trends. Commercially, these steps reduce redress situations, improve investor funding confidence and strengthen retailer partnerships. 

Looking ahead, the FCA can be expected to adopt an outcome-focused and evidence-led supervisory approach. Due to the fact that the rules are closely aligned with Consumer Duty principles, the FCA is likely to assess whether customer behaviour, complaint data and arrears outcomes demonstrate that the product works as intended. Early supervisory attention is likely to centre on affordability calibration, repeat borrowing patterns and the clarity of checkout disclosures within merchant environments. 

Firms that can evidence proportionate decision-making, clear consumer understanding and responsible treatment of customers in difficulty will be better placed to withstand regulator scrutiny. 

Those that rely on frictionless design without embedded governance should anticipate more intrusive supervision and potential thematic reviews as the FCA tests whether DPC has genuinely transitioned from a lightly regulated payment product into a mature, outcome-driven credit market.