UK BNPL rules to bring deferred payment credit under FCA oversight

The UK’s buy now, pay later market faces a shift from 15 July 2026, when deferred payment credit, the short-term, interest-free credit commonly used in BNPL products, comes under Financial Conduct Authority regulation. Alpa Jotangia, head of compliance at Ecommpay, said the change will put greater emphasis on affordability, customer communications, complaint handling and consumer outcomes at the point of sale.

BNPL has been widely adopted by merchants as a way to support checkout conversion, raise average order values and offer customers more payment flexibility, Jotangia wrote in a Finextra opinion piece. For consumers, the product has offered a way to divide the cost of purchases without using a traditional credit product, often without paying interest.

Jotangia said that commercial appeal remains, but the regulatory treatment will increasingly reflect the product’s credit characteristics. In practice, BNPL does more than move funds between buyer and seller. It allows a customer to receive goods or services immediately while delaying payment, creating a credit relationship that regulators expect to be explained and assessed.

New standards for lenders

Under the rules described by Jotangia, third-party deferred payment credit lenders will need to meet defined requirements covering affordability checks, clearer communications, complaints processes and broader customer outcomes. Consumers with eligible complaints about DPC agreements entered into from 15 July 2026 will also gain access to the Financial Ombudsman Service.

That mechanism matters because redress routes are a central part of regulated credit markets. If a borrower believes a DPC agreement was mishandled, the ombudsman route can provide an independent channel for eligible disputes, rather than leaving the issue solely between the customer and the provider.

Jotangia also said eligible DPC purchases from 15 July may benefit from connected lender and merchant liability, moving BNPL closer to protections consumers associate with credit cards. The article did not specify the detailed legal tests that would apply.

Checkout design becomes a compliance issue

The FCA’s rules will apply to third-party DPC lenders, not to merchants that only offer or introduce those options at checkout, according to Jotangia. She warned, however, that retailers still face commercial and reputational exposure if the BNPL journey is confusing, refunds are slow, complaints are poorly handled or customers believe they were steered into unsuitable borrowing.

For merchants, the practical questions include what information appears at checkout, how repayment terms are presented, how affordability checks are carried out, how returns affect the credit balance and how vulnerable customers are identified and supported, Jotangia said.

The change may add steps to a checkout process that payment firms have typically tried to make faster. Jotangia argued that some added checks and disclosures can support trust where credit is involved, provided they are proportionate and placed where customers need to understand the commitment they are making.

The UK approach follows a wider regulatory pattern. Jotangia noted that Australia has brought BNPL into its credit licensing regime, while the European Union’s revised Consumer Credit Directive brings more short-term and low-value credit products within scope. Her assessment is that BNPL is increasingly being treated by regulators as a credit product rather than only a checkout feature.

This story draws on original reporting from Finextra Research.