UK brings Buy Now Pay Later lenders under FCA regulation in 2026

Buy Now Pay Later lenders came under Financial Conduct Authority regulation on 15 July, bringing more than 10 million UK shoppers into a tighter regime that promises stronger protections but is also likely to mean more checks, more rejected applications and less frictionless credit at checkout. Firms offering Deferred Payment Credit now need authorisation to operate, turning a product that often felt like a shopping convenience into a regulated form of borrowing.

The new rules give consumers access to the Financial Ombudsman Service, section 75 Consumer Credit Act protections if something goes wrong with a purchase, and affordability and creditworthiness checks before credit is extended. The FCA also said lenders must provide information that helps borrowers understand the risks, their obligations, and the rights and protections attached to the product. Under the regulator’s definition, Deferred Payment Credit is interest-free credit repaid in 12 or fewer instalments within 12 months or less.

That change was legislated by the UK government on 14 July 2025, after years of pressure to bring the fast-growing sector under formal oversight. The FCA said it had long called for Buy Now Pay Later products to sit within its remit, and had backed the Woolard Review recommendation in 2021. The regulator also said it received 45 responses to its consultation on Deferred Payment Credit, while the government’s October 2024 consultation found respondents were generally supportive of a regulatory regime.

Ministers framed the move as a way to stop unaffordable borrowing and give certainty to a sector that they want to keep innovating and growing. The practical effect will be felt most sharply by shoppers who have relied on instant approval at the point of sale. Those borrowers are now more likely to face screening that can slow checkout or cut off access entirely, especially where budgets are stretched or a credit profile looks weak.

The new regime is not universal, however. It applies to lenders offering Deferred Payment Credit to finance goods or services bought from a merchant, but it does not cover merchants that offer their own Deferred Payment Credit agreements directly, and it does not cover broking of Deferred Payment Credit agreements. That limits the FCA’s reach to the lending side of the market, even as it redraws Buy Now Pay Later from an easy checkout option into a credit product carrying formal consumer protections and formal gatekeeping.