The Financial Conduct Authority's new regulatory framework for Buy Now Pay Later credit products came into force in 2026, bringing an end to the period in which these deferred payment arrangements operated largely outside the consumer credit regulation that applied to conventional loans and credit cards. The regulations require providers to conduct affordability assessments before extending credit, to present the terms of the arrangement in a standardised format, and to refer customers with payment difficulties to regulated debt advice services.
Buy Now Pay Later products had grown explosively over the previous five years, with providers including Klarna, Clearpay and Laybuy establishing themselves as a ubiquitous payment option across online and physical retail. Their popularity reflected genuine consumer demand for a flexible short-term financing option that, in many cases, carried no interest charge if repaid within the agreed period. However, consumer groups and debt charities documented growing evidence of individuals accumulating multiple concurrent BNPL obligations that created repayment difficulties invisible to credit reference agencies under the old unregulated framework.
The FCA framework requires the major BNPL providers to obtain authorisation as credit providers — a process involving assessment of their governance, financial resilience and systems — and to comply on an ongoing basis with the Consumer Duty obligations that apply across regulated financial services. The affordability check requirement is the most operationally significant change, requiring providers to build assessment systems capable of evaluating ability to repay before checkout completion.
Industry response to the regulation was mixed. Some larger providers had been preparing for regulation for several years and expressed support for a framework that would differentiate responsible operators from those with weaker lending standards. Smaller providers raised concerns about the cost of compliance and the potential for regulation to disadvantage newer entrants relative to established players with the capital to absorb the costs.
