Buy now pay later (BNPL) customers are set to gain significant consumer protections under new proposals from the Financial Conduct Authority (FCA), as the regulator prepares to bring this fast-growing form of credit within its remit.
In a move intended to align BNPL lending with existing standards for other credit products, the FCA has outlined plans to require affordability checks and stronger support for borrowers who find themselves in financial difficulty.
The proposals also open the door for BNPL customers to escalate complaints to the Financial Ombudsman Service for the first time.
The new rules are expected to come into force when BNPL regulation formally transfers to the FCA next year. The regulator has launched a consultation to shape the final framework, which will run until 26 September 2025.
Sarah Pritchard, deputy chief executive at the FCA, said the reforms were designed to strike a balance between protection and innovation. “We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected,” she said.
“Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions.”
Pritchard added that the FCA would focus on enforcing existing standards, such as the Consumer Duty, rather than creating new rules, in a bid to support growth and maintain flexibility for BNPL firms.
The move follows a surge in the popularity of BNPL products. Research published by the FCA found that one in five UK adults – equivalent to 10.9 million people – had used BNPL at least once in the 12 months to May 2024. This marked a sharp rise from 17% (8.8 million people) in 2022, highlighting the growing role of BNPL in household finances.
While BNPL can offer consumers access to short-term, interest-free credit and more flexible payment options, the regulator has cautioned that it carries the same risks as other forms of borrowing, including the potential for unmanageable debt if not properly regulated.
A temporary permissions regime will be introduced to allow firms to continue operating under FCA oversight while they undergo the full authorisation process. During this period, firms will be required to comply with key regulatory requirements, including the new affordability checks and support provisions.
The FCA said it is particularly keen to hear from BNPL lenders, consumer advocacy groups, and industry stakeholders during the consultation process. It has invited all interested parties to submit feedback before the September deadline.
