Is buy now pay later regulated by the FCA?

What changed on 15 July 2026

Before the change, interest-free instalment credit of this kind generally fell within an exemption in article 60F of the Regulated Activities Order, so the lenders behind most buy now pay later products did not need FCA authorisation for it. From 15 July 2026 that changed for deferred payment credit provided by third-party lenders. Entering into a regulated credit agreement as lender is a regulated activity under article 60B of the Order, and a third-party lender of deferred payment credit now needs permission to carry it on. Lenders that were not yet authorised when the regime began could continue under a temporary permission regime while they sought authorisation.

Authorised lenders are subject to FCA rules on how they lend and how they treat customers. The detail of those rules sits with the lender, but it affects merchants and partners too, because lenders pass many of their requirements on through merchant and partnership agreements.

What deferred payment credit means

Each element of the definition matters. The credit has to be interest-free. It has to be repayable in 12 or fewer instalments, over a period of 12 months or less. And it has to be provided by a third-party lender rather than by the business selling the goods or services. A product that charges interest, runs over a longer period or is repaid in more instalments is not deferred payment credit, but that does not make it unregulated. Credit to individuals that falls outside the definition will often already be regulated under the ordinary consumer credit rules.

What the new regime does not cover

Two main kinds of arrangement are outside the new regime. The first is credit provided by the seller itself, for example a retailer or service provider that lets its own customers pay for its own goods or services in interest-free instalments. That kind of arrangement may still rely on the existing exemption, which has its own conditions. The second is agreements entered into before 15 July 2026, which are not covered by the new regime. The legislation also keeps the existing exemption for a few specific third-party arrangements, such as some that finance insurance premiums or are made through an employer.

The line between seller credit and third-party credit is not always obvious. Group structures, arrangements where a seller sells its receivables to a funder, and platforms that sit between seller and customer can make it harder to say who the lender is. The legislation also brings in some arrangements where the lender buys the goods or services from a retailer under a pre-existing arrangement and supplies them to the customer itself. Those are the cases where the documents need the closest look.

Merchants offering BNPL at checkout

Offering a lender’s credit to customers can be credit broking under article 36A of the Regulated Activities Order, which covers presenting or offering credit agreements as well as making introductions. Article 36FB of the Order, added for the new regime, excludes from credit broking activities carried on in relation to a regulated deferred payment credit agreement. So a retailer that offers a third-party lender’s buy now pay later at checkout does not generally need credit broking permission for that alone.

The position can be different where the merchant offers other kinds of credit at checkout, such as interest-bearing instalment finance, which usually needs credit broking permission, or where it does more than broking, such as collecting repayments for the lender. How the exclusion applies to a particular arrangement depends on the detail of the legislation and of the agreements, so it is worth confirming rather than assuming.

Platforms and firms around the lender

Checkout providers, payment service providers, marketplaces and software companies that integrate buy now pay later each need to look at their own role. The credit broking exclusion is tied to deferred payment credit rather than to a type of business, but it does not cover other credit a platform offers or other activities it carries on, such as handling payments. Collecting debts and administering agreements under regulated credit agreements are regulated activities in their own right, so firms that service buy now pay later books on a lender’s behalf may also need to consider their position. Fintech software and platforms

Promotions of BNPL

Because deferred payment credit is now regulated credit, adverts and checkout messages that promote it can be financial promotions. The FCA’s consumer credit sourcebook includes rules on credit promotions, including that they must be clear, fair and not misleading. How the promotion rules apply to a merchant’s own checkout messages, product pages and adverts is an area where the detail matters, and lenders usually set requirements for their merchants. Promotions through influencers and affiliates are covered by FCA guidance FG24/1 on social media, published in March 2024. How the financial promotion rules work and social media and affiliates

Common misunderstandings

When a written opinion helps

A written legal opinion is worth considering when you are not sure whether your instalment product is seller credit or third-party credit, when you run a platform that sits between lenders and merchants, when you offer more than one type of credit at checkout, or when a lender or payment partner asks you to confirm your status. The opinion applies the new definitions to your contracts and your funding structure. How written opinions work