The FCA's Approach to Regulating Deferred Payment Credit

What's happening with regulation of buy-now-pay-later?

In mid-July, the FCA published their approach to regulation of Deferred Payment Credit (DPC). The new DPC rules will bring previously exempt ‘Buy Now Pay Later’ products into the regulatory perimeter.

DPC is defined as interest free credit which finances the purchase of goods and services, repayable in 12 or fewer instalments within 12 months or less.

In July 2026, lenders offering a DPC agreement to finance the purchase of goods and services from a merchant will come under FCA regulation. Merchants that offer their own DPC agreements directly will not.

What will the new rules be for buy-now-pay-later?

The Consultation makes clear that the FCA intends to introduce as few new rules as possible, instead relying on the Consumer Duty to ensure fair treatment of customers.

The new rules would introduce:

• Information requirements: providing consumers with information that helps them to make effective, timely and informed decisions about DPC borrowing before they enter an agreement, and throughout the life of the agreement.

• Creditworthiness: existing rules and guidance on creditworthiness will be extended to DPC.

• High-level standards and existing consumer credit rules: the Consumer Duty and some existing consumer credit rules will apply to DPC firms.

• Dispute resolution: DPC firms must meet the FCA’s complaint handling rules.

• Data reporting: The consultation is seeking feedback on its proposals for data reporting for DPC; as the regulator does not currently receive data from firms, it will use this feedback to ensure rules are proportionate.

The Consultation acknowledges that applying the creditworthiness rules to DPC could result in loss of access for consumers, particularly where lenders may be overly cautious in their assessments. The FCA feel that their approach is proportionate and will support firms that are new to regulation in avoiding becoming overly risk averse.

The discussion around unintended consequences of disproportionate application of the rules highlights just how important it is to ensure that firms are able to walk the tightrope between offering good protections for consumers whilst providing access – where appropriate – to good quality products and services. Understanding FCA expectations and current best practice is an invaluable first step.

The Consumer Duty and SMCR will apply to DPC firms. Given that there is under a year to regulation, DPC firms that are not already regulated must aim to start their compliance journey sooner rather than later: both regimes are interwoven throughout business strategy, governance and process.

DPC lenders who are not authorised and want to continue to offer DPC from 15 July 2026 will need to apply for and be authorised for the relevant consumer credit activities or have temporary permission. There will be a two-month window for applications for temporary permissions before the implementation date. The consultation closes on 26 September, and the FCA plans to issue a policy statement with final rules in early 2026, giving affected firms a few months in which to implement the final rules.

RB Compliance offers 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 includes 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.