BNPL Regulation: How to Prepare

Deferred Payment Credit (DPC), or Buy Now Pay Later (BNPL) as it’s more commonly known, will fall under Financial Conduct Authority (FCA) regulation from 15 July 2026. From ‘regulation day’, DPC lenders will need to either be authorised or have a temporary permission, and must comply with the FCA’s suite of rules, guidance and principles.

Final rules have now been published.

Agreements will be regulated where:

• The lender and the supplier of goods or services are not the same authorised firm

• There is an arrangement between a merchant and a lender, so that the lender becomes the legal supplier of goods and services to the customer.

They won’t be regulated where they are used to finance insurance premiums, fund employee borrowing, are provided by social landlords to their tenants or are entered into before regulation day.

While the temporary permission (TP) regime opens on 15 May, firms shouldn’t wait before getting started on their road to applying for BNPL FCA Authorisation.

Some elements of the DPC regime will not apply to firms within the TP regime as long as they hold a temporary permission. Firms should nevertheless be actively preparing for full regulatory compliance now. This includes developing and embedding governance arrangements, such as the Senior Managers and Certification Regime (SMCR), so that the necessary structures, values and behaviours are demonstrably in place at the date of authorisation.

These arrangements will be critical to demonstrating that the firm is “ready, willing and organised” to meet the FCA’s threshold conditions and ongoing regulatory requirements once authorisation is applied for and granted.

Publications in the run-up to the final rules made the FCA’s areas of focus for DPC lenders very clear. They expect to see firms:

• Give information to consumers that helps them make effective, timely and informed decisions, both before they enter into an agreement and throughout its duration.

• Lend responsibility and affordably.

• Support customers who are facing financial difficulty.

  
  

There are a wide range of FCA rules and regulations that new firms will need to act fast to get into place ready for full authorisation, including most elements of CONC, the Consumer Duty and SM&CR – including the Conduct Rules.

New DPC lenders aiming for authorisation should therefore plan for SM&CR readiness by:

• Mapping senior management and control responsibilities.

• Preparing Statements of Responsibilities and governance documentation.

• Ensuring systems are in place for certification and fitness assessments.

• Ensuring that staff are trained on the Conduct Rules.

Once fully authorised, firms will also need to abide by the Consumer Duty obligations, which are designed to ensure fair outcomes for retail customers. The Duty sits alongside other provisions, such as the affordability and creditworthiness rules under CONC, and importantly raises the required standard of treatment.

As the FCA is placing emphasis on the Consumer Duty as part of a proportionate, outcomes-oriented regime for DPC, rather than creating a suite of entirely new rules, DPC lenders will need to demonstrate that information, communications and support are designed and delivered so that customers can make timely, informed decisions that lead to good outcomes.

There are, however, important new rules that DPC lenders should be aware of. A new rule at CONC 7.20.1R sets out that where borrowers have missed a payment the firm must notify the borrower about the missed payment, any charges due but unpaid, and provide enough information for the borrower to understand which agreement the missed payment relates to, any consequences for the missed payment and what the borrower should do next.

Importantly, preparation is about embedding the changes in practice, beyond simply publishing them in documentation.

For organisations new to regulation, this is an understandably daunting process. We can help you with our bespoke assistance with BNPL authorisation: contact robert.bell@rbcompliance.co.uk.

We also offer a range of support to help firms new to FCA regulation to start the process of authorisation and to embed its compliance regulations. Our services include FCA Application templates and bespoke support for the authorisation process. The Consumer Duty and SMCR are complex and multifaceted regimes; we offer free webinar introductions as well as a variety of templates and guides.