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From 15 July 2026 the Financial Conduct Authority regulates Buy Now, Pay Later, requiring affordability checks, clearer information, support for those in difficulty, Section 75-style protection and Financial Ombudsman access. Supporters say it protects borrowers; some warn tighter checks could make credit harder to obtain for a minority.

Key takeaways

  • From 15 July 2026 the FCA regulates Buy Now, Pay Later, known formally as Deferred Payment Credit, for the first time.
  • Lenders must carry out proportionate affordability checks, provide clearer information and support customers in financial difficulty.
  • Borrowers gain access to the Financial Ombudsman Service and, in many cases, Section 75-style protection under the Consumer Credit Act.
  • Firms can keep operating through a Temporary Permissions Regime while they seek full authorisation, with a notification window that closed on 1 July 2026.
  • The main debate is between stronger consumer protection and the risk that tighter checks could make credit slightly harder to obtain for some borrowers; the scale of any exclusion is not yet known.

One of the fastest-growing corners of British consumer finance has, from today, come under formal supervision. From 15 July 2026, the Financial Conduct Authority regulates Buy Now, Pay Later, the short-term instalment credit that lets shoppers spread the cost of a purchase, usually interest-free. Known in the rulebook as Deferred Payment Credit, the sector has until now sat largely outside the FCA's consumer-credit regime. The new rules require lenders to check that customers can afford to repay, to give clearer information and to support those who fall behind, while extending access to the Financial Ombudsman Service and, in many cases, Section 75-style protection. Supporters call it overdue; some in the industry warn that tighter checks could, at the margin, make credit harder to obtain for a minority of users.

What has changed today

The change marks the end of a long policy journey. The FCA consulted on its approach in 2025 and published its policy statement and final rules on 11 February 2026, setting 15 July 2026 as the day regulation begins. From this date, firms offering regulated Deferred Payment Credit must either hold full authorisation or operate under a temporary arrangement while they apply for it. In practice, the biggest names in the market are affected, alongside a range of smaller providers.

The FCA describes Buy Now, Pay Later as an important source of credit for many households, but one that has grown quickly with limited oversight. Its rules are designed to bring the sector broadly into line with other forms of consumer credit, while allowing for the fact that these are typically small, short-term, interest-free agreements. The regulator has said its checks should be proportionate rather than onerous, a balance that will be tested in practice.

Inside the new rulebook

Four requirements sit at the heart of the regime. First, lenders must carry out proportionate affordability assessments before offering credit, to reduce the risk of customers taking on borrowing they cannot manage. Second, consumers must receive clear, upfront information about their agreement, including when payments are due, how much they are and what happens if a payment is missed.

Third, firms must support customers who fall into financial difficulty, offering forbearance where appropriate and directing people to free debt advice. Fourth, borrowers gain a route to independent redress through the Financial Ombudsman Service if a complaint cannot be resolved with the provider. Taken together, the measures aim to address a common failure pattern the regulator has highlighted, in which several individually manageable plans overlap and become unaffordable at once.

The affordability requirement is the most consequential change. Until now, many Buy Now, Pay Later approvals have relied on light-touch or soft credit checks completed in seconds at the online checkout. Under the new rules, that assessment must be more robust, though the FCA has stressed it should remain proportionate to the size and nature of the credit. How firms interpret proportionality will shape both consumer protection and access.

Section 75-style protection and the Ombudsman

A significant addition is the extension of protections modelled on Section 75 of the Consumer Credit Act. This provision makes a credit provider jointly liable with the retailer if something bought on credit is faulty, misdescribed or not delivered, giving the consumer a claim against the lender as well as the seller. For Buy Now, Pay Later users, that is a meaningful new safeguard that credit-card holders have long enjoyed.

There are limits worth understanding. Under the Consumer Credit Act, Section 75 generally applies where the cash price of the item is more than £100 and no more than £30,000. Many Buy Now, Pay Later purchases fall below that lower threshold, so the smallest transactions may not attract the full protection. Consumers should therefore not assume that every pay-later purchase automatically carries Section 75 cover; the detail of each agreement matters.

Access to the Financial Ombudsman Service is the other structural change. It gives borrowers an independent body that can investigate complaints and, where it finds unfair treatment, direct a firm to put things right, including through refunds. For a sector that previously offered no such route, this is a notable shift in the balance between provider and customer.

The Temporary Permissions Regime

To avoid a cliff-edge in which firms would have to stop lending overnight, the FCA has put in place a Temporary Permissions Regime. This allows eligible providers already active in the market to keep operating while they seek full authorisation, provided they registered within the required window and paid the associated fee. The notification window for that temporary status closed on 1 July 2026, shortly before regulation began.

Firms entering the regime must still work towards meeting the full standards, with authorisation expected to follow over the following months rather than being complete on day one. The arrangement is designed to protect continuity of service for consumers while giving the regulator time to assess applications properly. It also means the practical effects of the rules will be phased in, rather than felt all at once.

Why it matters

For consumers, the appeal of the regime is straightforward: clearer information, a check on affordability, help if things go wrong and an independent complaints route. Around 10.9 million UK adults used Buy Now, Pay Later in the year to May 2024, according to FCA figures, so even modest improvements in protection touch a large slice of the population, weighted towards younger and lower-income shoppers who use these products more heavily.

For retailers, Buy Now, Pay Later has become an established part of the online checkout, associated with higher conversion and larger baskets. Tighter rules add compliance obligations and could, in some cases, mean a few more shoppers are declined at the point of sale. For the wider economy, the change formalises a form of credit that had grown rapidly with little visibility in official statistics, which should improve the authorities' understanding of household borrowing.

There is also a financial-stability dimension, albeit a modest one. Because Buy Now, Pay Later debts have often been invisible to traditional credit reference agencies, lenders elsewhere could not always see a borrower's full commitments. Better data and affordability checks should, over time, give a more complete picture of household indebtedness, which is useful for both individual firms and policymakers.

The access question

The central tension in the reforms lies between protection and access. Stricter, more robust affordability checks are intended to stop people borrowing more than they can repay. The same checks could, however, mean that some applicants who would previously have been approved are now declined, particularly those with thin credit files, irregular incomes or existing debts. The original framing of this debate, that new rules could shut large numbers of people out of credit, captures a genuine concern, but the scale of any such effect is not yet established.

It is worth being cautious here. The FCA has been explicit that checks should be proportionate to small, interest-free lending, which suggests the intention is not to impose the full weight of mortgage-style underwriting on a £60 purchase. Whether the practical outcome matches that intention will depend on how individual firms design their systems and set their risk appetite. Some tightening of approvals appears likely; a wholesale exclusion of millions is not a confirmed outcome and should not be presented as one.

There is a further nuance. Agreements taken out before 15 July 2026 remain outside the new regime, so existing borrowers do not gain retrospective protection on those plans. New protections apply to agreements entered into once regulation is in force, which means the benefits will build gradually as older arrangements run off and new ones take their place.

How the big providers are placed

The market is dominated by a handful of large providers, including Klarna, Clearpay and PayPal, alongside home-grown challengers such as Zilch. These firms typically offer variations on paying in three or four instalments, or deferring payment for a set period, usually without interest when payments are made on time. Their business models rely on high approval rates and a frictionless checkout, so the new affordability and disclosure requirements bear directly on how they operate.

Providers have had time to prepare, given the rules were finalised in February 2026, and several are captured by the transitional arrangements that allow continued lending during authorisation. How each firm implements proportionate checks, and how it communicates the new protections to customers, will influence both compliance and competitiveness. The regulator's willingness to intervene where standards fall short will become clearer once the regime beds in.

The market in context

The growth of Buy Now, Pay Later has been striking. According to figures cited by the FCA, the value of this lending rose from around £0.06bn in 2017 to more than £13bn by 2024, a transformation from a niche option into a mainstream payment method in under a decade. That rapid expansion, combined with its popularity among younger consumers, is a large part of why regulators moved to bring it into the perimeter.

The sector's appeal rests on convenience and the absence of interest, which distinguishes it from credit cards and traditional loans. Critics have long argued that the ease of use can encourage over-commitment, especially when multiple small agreements accumulate. The new rules attempt to preserve the convenience while adding guardrails, a balance that regulators in several countries have been grappling with as the model has spread internationally.

Key risks and uncertainties

Several uncertainties remain. The first is calibration: if affordability checks prove too strict, they could push some consumers towards costlier or less regulated forms of credit, an outcome that would undercut the policy's intent. If they prove too lax, the protections may do little to change behaviour. Striking the right balance is genuinely difficult and will only be judged over time.

A second uncertainty concerns implementation and enforcement. The effectiveness of the regime depends on how firms interpret the rules and how actively the FCA supervises them, particularly during the transitional period when many providers are still seeking full authorisation. A third is data: whether Buy Now, Pay Later borrowing becomes fully visible to credit reference agencies, and how quickly, will shape the wider benefits for responsible lending.

What to watch next

Key markers will include how many firms secure full authorisation, and whether any exit the market or curtail their offering. Early evidence on approval rates will indicate whether access has tightened materially, and for whom. Consumer complaints data and the first Financial Ombudsman decisions in this area will show how the new redress route is working in practice.

It will also be worth watching how providers adapt their products, whether new fees or features emerge, and how the treatment of pre-regulation agreements is handled. Any further FCA guidance on what counts as a proportionate affordability check would help resolve the central question of how the protection-versus-access trade-off plays out.