Buy-Now, Pay Later - The Journey Continues (and the end is nearly in sight)

By way of background, following concerns about potential material consumer indebtedness arising from the exponential growth in the ready availability of BNPL, and some four years after the 2021 Woolard Review concluded urgent action was needed to address that, 2025 is still set to see the enactment of legislation that brings the majority of traditional BNPL within the scope of the Financial Service and Markets Act 2000 (FSMA) and the CCA.

The U.K. Financial Conduct Authority (FCA) is then charged with delivering a tailored conduct of business framework so that, in 2026, most BNPL will be offered within a regime that provides appropriate levels of consumer protection while ensuring that lenders are not deterred from continuing to offer these useful interest-free products.

The latest paper confirms policy decisions, explains legislative drafting choices and sets out the road map to implementation but, as you will see below, nothing has really changed from the proposals we saw last year.

1. The timetable is still the same - regulation to go live mid-2026

The draft statutory instrument has now been laid before Parliament and, once passed, the FCA will have twelve months to draft, consult on and finalise its rules with a view to BNPLs becoming regulated credit agreements around the middle of 2026.

2. Merchant lending remains exempt (for now)

Despite the fact that it appears that most respondents expressed concerns at merchant provided credit remaining unregulated, as previously proposed the new regulatory perimeter will only include BNPL offered by third-party lenders. Merchant-provided instalment credit remains exempt for now, but the U.K. Government will “closely monitor” that market and is prepared to act swiftly if consumer detriment emerges.

3. CCA information rules – out with the old

The CCA disclosure requirements – pre-contract, contractual and ongoing information – will be switched off, which is good news. It will be down to the FCA to create tailored disclosure rules (which should hopefully pave the way for its work on dismantling the existing CCA requirements for other regulated credit agreements in due course).

4. Oversight not CCA sanctions

With the disapplication of key CCA provisions, automatic sanctions such as unenforceability without a court order will fall away and protections will instead be provided by the FSMA supervisory regime, the Consumer Duty, the CONC rules and access to the Financial Ombudsman Service.

5. Time orders survive

In one of the few changes set out in the paper, the provisions relating to time orders are broadly retained and courts will still be able to grant borrowers extra time to pay where enforcement or termination is threatened.

6. Credit-broking exemptions for most (but not all) merchants

Most retailers simply offering BNPL as a payment option will not need credit-broking permission, which will be welcome confirmation for retailers. An exception remains for domestic-premises suppliers i.e. traders selling in consumers’ homes. They will still need to be authorised by the FCA to offer BNPL. It appears that this issue was subject to some debate and no settled position was reached so, rather than wait and slow down the timetable, HM Treasury has moved forwards still requiring authorisation, but is reviewing whether that carve-out should ultimately mirror the wider merchant exemption.

7. Financial promotion controls tightened

While not needing to be authorised is good news for merchants, it does bring certain practical complexity in that unauthorised merchants must have BNPL promotions approved by an authorised firm. Drafting has been refined to ensure BNPL firms in the Temporary Permissions Regime (TPR) can approve materials for onward communication by their merchant partners but cannot approve third-party promotions.

8. A new temporary permissions regime

Existing unauthorised BNPL lenders will be able to continue lending under a bespoke TPR while their full authorisation applications are assessed.

9. Senior managers & certification regime (SM&CR)

To reduce transitional burdens, both the Senior Managers and the Certification elements of SM&CR will be switched off for firms operating under the TPR, though broader FCA oversight will still apply.

10. Data-sharing with credit reference agencies (CRAs) encouraged

HM Treasury supports the FCA’s proposal to mandate credit-agreement data sharing with designated CRAs in the expectation that better reporting will enhance affordability assessments improving outcomes for borrowers.

All in all, there are no late surprises at this stage. The draft statutory instrument has been laid before Parliament and, based on the average time for the draft affirmative procedures in the House of Commons, we can expect it to be enacted in six to seven weeks. It seems likely that the FCA consultation on the proposed rules will follow hard on its heels in order to meet the mid-2026 regulation objective. There are two points that will be interesting to see play out. First, will the FCA drive the same high standards into the application process as we are seeing in others – particularly the payments sector. Second, will the FCA’s approach to the new rules set the scene for its wider CCA reform and the move from CCA rigidity to rules-based flexibility.