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Introduction to Buy Now Pay Later Regulation: What Has Changed?
Buy Now Pay Later can make a purchase feel manageable. The cost is split into smaller payments, often without interest. But smaller payments are still borrowing, and several agreements can become difficult to manage at once.
Buy Now Pay Later regulation changed in the UK on 15 July 2026. Certain interest-free agreements provided by third-party lenders now fall under Financial Conduct Authority (FCA) rules. Lenders must check affordability, explain the agreement clearly and support customers who struggle to repay. The change also affects what retailers say at checkout and what customers can expect if something goes wrong.
What Changed Under Buy Now Pay Later Regulation?
The main change concerns a type of borrowing called Deferred Payment Credit (DPC). It is interest-free credit repaid in no more than 12 instalments over no more than 12 months. Before 15 July 2026, the agreements covered by the change were generally outside FCA regulation. Third-party lenders offering new, qualifying DPC agreements must now be authorised for the relevant activity or hold temporary permission.
Regulation brings obligations into the lending decision and the life of the agreement. A lender must consider whether the customer can afford the repayments. It must provide useful information before the customer commits and respond appropriately if payments are missed. For a customer, the checkout choice should be easier to understand before it becomes a debt.
Why Were the Rules Changed?
In its research on borrowing outcomes, the Financial Conduct Authority found that DPC users were, on average, more financially vulnerable than the wider UK population.
Interest-free borrowing can still create pressure when repayment dates overlap with rent, bills and other credit commitments. A customer might assess each purchase separately while losing sight of the total due that month. Clear information and proportionate affordability checks help people make a more informed choice.
The aim of Buy Now Pay Later regulation is to reduce avoidable harm while preserving access to credit where it works for customers. That distinction matters. The question is whether someone understands the agreement and can meet its payments without creating further difficulty.
Which Agreements Does Buy Now Pay Later Regulation Cover?
The new rules principally cover qualifying DPC supplied by a third-party lender to finance goods or services bought from a merchant. For example, a customer buys an item from a retailer and chooses an interest-free instalment plan provided by a separate finance company. The lender and the supplier are different businesses.
The rules can also apply where an arrangement makes the lender the legal supplier of the goods or services. The legal structure matters more than the words displayed on a payment button. Businesses should identify who provides the credit, who supplies the purchase and which agreement the customer actually signs.
“Buy Now Pay Later” is a broad everyday term. Some products carrying that label charged interest or were already regulated before July 2026. The recent change concerns the previously exempt DPC agreements brought within the FCA’s remit. Teams explaining payment options need to understand that difference. Changes such as open banking adoption reshaping financial services also show why financial services teams increasingly need to explain unfamiliar products and payment technology in clear language.
Which Payment Plans Remain Outside the New Rules?
A retailer’s own DPC remains outside this particular regulatory change when the same business sells the goods or services and provides the credit itself. An agreement entered into before 15 July 2026 also remains outside the new DPC regime. The protections introduced on that date do not apply retrospectively to it.
There are other specific exclusions, including certain agreements used to finance insurance premiums and some employee borrowing arrangements. Broking DPC agreements is exempt from regulation under these changes. That does not mean a retailer should describe a payment option carelessly or assume every related activity is free of other legal duties.
Buy Now Pay Later regulation therefore calls for a product-by-product check. A familiar checkout label cannot establish whether an agreement is regulated. The lender, retailer and customer all need the correct description of the actual arrangement.
What Must Lenders Do Before Customers Borrow?
For new regulated DPC agreements, lenders must make proportionate checks that customers can afford to repay. The check should reflect the credit offered and the risk involved. An interest-free price tag does not remove the need to assess whether the scheduled payments are manageable.
Lenders must also give customers important information before they agree. That includes how much they are borrowing, the size and timing of repayments, any late fees, and their rights and protections. The customer should be able to understand the commitment at the point of decision, rather than discover key terms after checkout.
Buy Now Pay Later regulation changes the quality of the conversation as well as the lender’s process. A clear explanation can help a customer decide that an option fits. It can also help them recognise when it does not. The growth of real-time payments changing banking expectations is another example of how customer expectations around speed, clarity and financial transactions continue to evolve.
What Happens If a Customer Misses a Payment?
A missed instalment should trigger support, not simply another unexplained charge. Under the FCA’s DPC rules, lenders must contact customers about missed repayments and explain what the missed payment means. They must provide appropriate support when a customer is in financial difficulty.
Customers should contact the lender as soon as they know a payment may be difficult. Waiting can make it harder to understand the options available. They should also look at all their upcoming instalments together, including agreements held with other providers, before taking on more borrowing.
For lenders, Buy Now Pay Later regulation makes the tone of arrears conversations especially important. Staff need to listen, identify the customer’s circumstances and explain the next step without pressure or judgement. The wider move towards embedded finance changing banking faster than expected makes these customer journeys more important because financial products increasingly appear within non-financial purchasing experiences.
What New Rights Do Customers Have?
Customers with a new regulated DPC agreement can complain to the lender about how it has treated them. If the complaint is not resolved satisfactorily, they may be able to take it to the Financial Ombudsman Service. This gives customers an independent route to challenge a problem with the lender.
Section 75 of the Consumer Credit Act can also provide protection for eligible purchases made using regulated DPC. If a supplier breaches its contract or misrepresents what it sells, the customer may be able to seek a remedy from the lender. Whether a particular claim qualifies depends on the circumstances and the applicable Section 75 conditions.
Buy Now Pay Later regulation gives customers more than a longer list of terms. It creates clearer routes for help when a purchase or lending experience goes wrong. Lenders should explain those routes in language customers can use.
What Does the Change Mean for Retailers?
Many retailers offer DPC at checkout through a separate lender. Broking these agreements is exempt under the new DPC rules, but the retailer still has a practical role in the customer’s decision. Payment choices, product descriptions and staff explanations should make clear who provides the credit and what the customer is agreeing to.
A checkout journey can create confusion even when the lender’s agreement contains the right information. If instalments appear beside the product price, customers may focus on the smaller figure and miss the total cost or repayment dates. Retailers should review what appears before the customer selects the payment option and whether staff can answer basic questions accurately.
Buy Now Pay Later regulation also makes coordination with lending partners more valuable. Retailers need to know where to direct questions about affordability, missed payments, refunds and complaints. Developments such as asset tokenisation reshaping financial services reinforce how quickly financial products and infrastructure are changing, increasing the need for accurate customer explanations.
Do Older Buy Now Pay Later Agreements Change?
No. A DPC agreement entered into before 15 July 2026 remains exempt from the new regulatory regime. Signing a new agreement with the same provider after that date may put the new borrowing under different rules. Customers should check the date and terms of each agreement separately.
This distinction matters when someone has several instalment plans. They may see different rights and information for an older purchase and a newer one. A provider should avoid suggesting that all past agreements gained the new protections automatically.
Buy Now Pay Later regulation applies according to the agreement and its date, not merely whether a customer has used the provider before. Clear records and clear explanations will help resolve questions later.
How Can Lenders Check That Their Customer Journey Is Clear?
A lender can begin by following a customer from the first payment-option message through approval, confirmation, repayment reminders and support after a missed payment. At each point, ask what the customer needs to know and whether the information arrives in time to help them act.
Teams should test whether a customer can identify the total borrowed, the exact payment schedule and any late fees without searching through several screens. They should also check whether staff know how to handle a question they cannot answer, rather than making an assumption about eligibility or protection.
Buy Now Pay Later regulation requires more than compliant wording stored in a document. Customers experience the explanation through screens, emails and conversations. The expansion of private credit growing faster than traditional banks shows how the financial services landscape is becoming broader, giving customers more products, providers and funding models to understand.
What Should Lenders, Retailers and Customers Do Next?
Lenders should confirm which products fall within the DPC rules, whether they have the required authorisation or temporary permission, and how their affordability, information and customer-support processes work in practice. Firms without the relevant permission cannot enter into new regulated DPC agreements.
Retailers should check the identity of their lending partners and review how instalment options appear to customers. Staff need to know which questions they can answer and which should go to the lender. Customers should check the total commitment, repayment dates and the lender’s status before choosing an instalment plan.
The strongest response to Buy Now Pay Later regulation is straightforward: explain the product accurately, check that it is affordable and make help easy to find. At the same time, cybersecurity in financial services is getting harder, so firms also need to protect the digital systems and customer information supporting increasingly connected payment journeys.
Frequently Asked Questions About Buy Now Pay Later Regulation
When did Buy Now Pay Later regulation change in the UK?
Buy Now Pay Later regulation changed in the UK on 15 July 2026, when qualifying Deferred Payment Credit agreements provided by third-party lenders came within FCA regulation. The new Buy Now Pay Later rules apply to qualifying agreements entered into from that date. Agreements made before 15 July 2026 generally remain outside the new DPC regulatory regime, so customers should check when their individual agreement was entered into.
Is every Buy Now Pay Later product now regulated?
No. Buy Now Pay Later regulation does not mean every instalment or interest-free payment product is regulated in exactly the same way. The July 2026 changes principally affect certain previously exempt Deferred Payment Credit agreements offered by third-party lenders. Some credit products were already regulated before the changes, while certain merchant-provided payment plans and other excluded arrangements can remain outside the new Buy Now Pay Later regulatory regime.
Does a retailer need FCA authorisation to offer a third-party payment option?
Under the 2026 Buy Now Pay Later regulation changes, broking qualifying Deferred Payment Credit agreements is exempt from FCA regulation. The third-party lender actually providing regulated DPC must have the appropriate FCA authorisation or temporary permission. Retailers should still understand their payment arrangement, identify the lender clearly and ensure customers receive accurate information about the Buy Now Pay Later option offered at checkout.
Does a shop’s own interest-free instalment plan fall under the new rules?
A retailer’s own qualifying Deferred Payment Credit arrangement can remain outside the new Buy Now Pay Later regulation where the same business supplies the goods or services and also provides the credit. The July 2026 changes focus mainly on qualifying interest-free credit provided through a separate third-party lender. Businesses should examine the actual legal structure of the agreement rather than assuming every interest-free instalment plan is treated identically.
Are lenders required to check affordability?
Yes. Buy Now Pay Later regulation requires lenders providing regulated Deferred Payment Credit to carry out proportionate checks before entering into an agreement. The lender must consider whether the customer can afford the scheduled repayments. Although qualifying Buy Now Pay Later borrowing may be interest-free, it is still credit and can create financial pressure when a customer has several repayment commitments at the same time.
Can customers complain to the Financial Ombudsman Service?
Customers using regulated Buy Now Pay Later products can complain to their lender if they believe they have been treated unfairly or something has gone wrong with the agreement. If the lender does not resolve the complaint satisfactorily, the customer may be able to refer the matter to the Financial Ombudsman Service. This is one of the important consumer protections introduced through Buy Now Pay Later regulation for qualifying new agreements.
Does Section 75 apply to regulated Buy Now Pay Later purchases?
Section 75 protection can apply to eligible purchases made using regulated Buy Now Pay Later credit. Where the relevant legal conditions are met, a customer may be able to pursue the lender if the supplier breaches its contract or misrepresents the goods or services purchased. Buy Now Pay Later regulation therefore gives qualifying customers protections that may extend beyond dealing directly with the retailer, although Section 75 eligibility depends on the individual transaction and circumstances.
What if I took out an agreement before 15 July 2026?
If a Buy Now Pay Later or Deferred Payment Credit agreement was entered into before 15 July 2026, the new Buy Now Pay Later regulation does not apply retrospectively to that agreement. A customer could therefore hold an older agreement under the previous rules and a newer agreement with the same provider that falls within FCA regulation. Customers should check the date and terms of each agreement separately and contact the lender if they are unsure which protections apply.
Can a lender with temporary permission still offer DPC?
Yes. A lender operating within the FCA temporary permissions regime can continue providing regulated Deferred Payment Credit while it remains entitled to operate under that regime. The lender must comply with the relevant Buy Now Pay Later regulation and FCA requirements for qualifying agreements entered into from 15 July 2026. Customers can check who provides the credit and the regulatory status of the lender before entering into a new agreement.
What should a customer check before choosing Buy Now Pay Later?
Before choosing Buy Now Pay Later, customers should check who the lender is, the total amount being borrowed, the number and value of repayments, each repayment date and whether any late fees or other charges apply. They should compare the new payments with existing household bills, loans, credit cards and other instalment agreements. Buy Now Pay Later regulation provides stronger protection for qualifying credit, but customers still need to decide whether the total repayment commitment is affordable before agreeing to borrow.
Buy Now Pay Later regulation gives lenders clearer duties and customers stronger protection for qualifying new agreements. Its value depends on people understanding the borrowing before they agree to it, and knowing where to turn if repayment becomes difficult.
We provide financial services sales training for financial advisers, wealth managers, mortgage advisers, insurance advisers and firms that want clearer, more effective client conversations. Our training includes practical sales workshops, team training and tailored coaching built around the conversations your people have with prospective and existing clients every day. We help them ask better questions, understand what clients want to achieve, explain suitable options clearly and communicate the value of professional advice with confidence. We support financial services teams across the UK that want to improve conversion rates, win more of the right clients, retain more business and grow without relying on high-pressure sales techniques.
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