In February, the Financial Conduct Authority (FCA) confirmed that new rules governing Buy Now, Pay Later (BNPL) will come into force on July 15, writes Payment Assist CEO Marcus Gregory.
The move, which sees deferred payment credit officially brought under FCA regulations, will provide customers with greater levels of support around BNPL finance, as well as deeper affordability checks from lenders.
BNPL under formal regulation
Initially proposed back in 2025, the new rules will require lenders to provide customers with clear information before taking out a BNPL product, with details about their agreement laid out upfront, including payment amounts, dates and what happens if they were to miss repayments.
Consumers will also be subject to affordability checks to ensure they can afford to repay what they are borrowing. Support will be provided by lenders when customers are in financial difficulty, with guidance from free debt advice services.
Finally, should there be unresolvable issues, consumers will be able to take their case to the Financial Ombudsman Service (FOS).
Impact on customers and lenders
With the soaring cost of living putting increased pressure on household income, the ability to spread out payments has provided a valuable lifeline for customers, particularly when it comes to larger unexpected expenditure.
However, this lending has been, in financial terms, widely unregulated.
Under current rules, retailers can offer customers the option to spread purchase costs over the course of up to a year, interest-free, without falling under the scope of consumer credit regulation.
There have been concerns from money advice and debt support groups that consumers are putting themselves unwittingly into unmanageable debt, which is precisely why regulations are changing.
Bringing BNPL within the scope of FCA regulation is an important and positive step forward for the sector, with the relationship between retailers and customers set to fundamentally change.
Going forward, customers will receive clear disclosures, come under proportionate affordability checks, be offered stronger customer support and have access to the FOS for any unresolved disputes.
Affordability focus to impact approvals
The primary benefit revolves around affordability. With increased checks on a customer’s finances, they are less likely to be approved for BNPL lending when they will struggle to afford it.
It does mean that there will likely be more applications turned down but, ultimately, it will see fewer customers come under financial strain.
However, the greatest changes really come after the point of purchase. With FCA regulation, customers are supported by additional layers of protection.
If a customer makes a complaint and are not happy with the outcome, they have the chance to raise the issue with the FOS for an independent adjudication.
Limited impact for regulated providers
For some BNPL providers, the incoming regulations are going to require wholesale changes. For the likes of Payment Assist, there will be targeted enhancements to our existing framework, but since we are already regulated, it simply means that the regulatory requirements are met for previously unregulated products.
Importantly, distributors, suppliers, and merchants offering BNPL will not have to obtain a consumer credit licence. Instead, the changes will be implemented by the financial providers themselves.
The responsibility lies with the lender, as they must ensure that the customer gets the best possible outcome at all times.
BNPL sector faces competition
During this period of change and increased regulatory pressure, the BNPL industry will need to embrace transformation. Those that successfully navigate this changeover period will likely evolve their offerings beyond simple credit agreements.
The likelihood is that more comprehensive financial products and packages will be available, maximising technological developments with ease-of-use systems that make lenders more competitive.
It could even see BNPL providers competing with established high street banks – not just on credit offerings, but across a broader spectrum of financial services.
All in all, this is an important step forward for the industry and one that should be welcomed with open arms. It’s an opportunity to further improve lending options for consumers and, for BNPL providers themselves, to compete on the basis of transparent, sustainable credit.
Author: Marcus Gregory, CEO, Payment Assist
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