BNPL and the New FCA Rules From July 2026
A note before you start (5 August 2026): most BNPL lending only became FCA-regulated on 15 July 2026. For agreements taken out before that date the routes to a claim are limited — the affordability rules and the Financial Ombudsman's compulsory jurisdiction did not apply to BNPL activity (Zilch, regulated since 2020, is the exception). We are confirming with our claim partner exactly which BNPL agreements they can take on, and will update these pages once that is settled. Until then, please treat these pages as guidance on where complaints stand rather than an invitation to claim on a pre-regulation agreement.
For most of its UK history, Buy Now Pay Later — Klarna’s Pay in 3, Clearpay, PayPal Pay in 3, Zilch and similar — has sat outside formal financial regulation. That changes on 15 July 2026 (“Regulation Day”), when third-party deferred payment credit (DPC) comes under the FCA’s consumer credit regime. This page sets out what is changing, what stays the same, and what the shift means for affordability complaints — both for new BNPL agreements and for older ones taken out before regulation began.
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What is changing on 15 July 2026
On 14 July 2025 the Government legislated to bring third-party DPC under FCA regulation. The FCA published its final rules in policy statement PS26/1 on 11 February 2026. From Regulation Day:
- Third-party DPC agreements become regulated credit agreements under the FCA framework.
- CONC 5.2A creditworthiness rules apply, including to DPC agreements of £50 or less.
- New pre-contractual information requirements apply, with key information set out before the agreement is entered into.
- The DISP complaints rules apply, and FOS’s compulsory jurisdiction extends to DPC activities.
- Section 75 of the Consumer Credit Act applies, giving consumers joint-and-several rights against lender and merchant for goods that are faulty, not delivered, or misdescribed.
- Lenders must support customers in financial difficulty and signpost to free debt advice.
A Temporary Permissions Regime (TPR) ran from 15 May to 1 July 2026 for firms not yet authorised. Firms in the TPR have six months from Regulation Day to apply for full authorisation. Firms with neither authorisation nor TPR registration cannot enter into new DPC agreements after Regulation Day — doing so is a criminal offence — but can continue to service pre-Regulation Day agreements, which remain unregulated.
What stays the same
A few important things are not changing:
- Merchant-direct DPC remains unregulated — where a merchant offers DPC directly (rather than through a third-party lender), it stays outside the new regime.
- BNPL on credit cards is unaffected — Pay-in-instalments features on existing credit cards are already regulated as part of the credit card agreement.
- No FSCS protection — the FCA confirmed the Financial Services Compensation Scheme will not be extended to DPC, on the basis it would be of limited benefit to BNPL customers.
- BNPL stays interest-free — the new rules don’t change the commercial nature of BNPL; they bring it under regulatory standards but don’t introduce price controls.
What it means for affordability complaints
The position depends on when the BNPL agreement was taken out:
BNPL taken out from 15 July 2026 onwards
These agreements are regulated. The standard affordability framework applies — CONC 5.2A, DISP, Section 75, Consumer Duty, FOS compulsory jurisdiction. If the lender failed to carry out reasonable and proportionate creditworthiness checks, or if proper checks would have shown the credit was not affordable, an unaffordable lending complaint is available in the same way as for any other regulated credit product.
BNPL taken out before 15 July 2026
These agreements remain unregulated. CONC does not apply, FOS’s compulsory jurisdiction over the activity does not apply, and Section 75 does not apply. That does not necessarily mean there is no recourse — claims based on the Consumer Credit Act’s Section 140A unfair relationship test, or on common-law principles, may still be available — but the practical landscape is much more complex than for regulated credit.
Some BNPL providers have voluntarily applied affordability and dispute resolution standards higher than the law required. Some have also held FCA authorisations for related regulated products (Klarna Financial Services UK, for example, has held FCA authorisation for its regulated credit and EMI activities since 2023, separate from its unregulated BNPL). This patchwork of permissions affects what complaint route may be available for a particular pre-Regulation Day agreement.
Common BNPL affordability concerns
Whether before or after Regulation Day, the affordability concerns that have driven BNPL into regulation are well documented:
- Borrowers using multiple BNPL providers in parallel, with no single lender having visibility of the total commitment.
- Repeat BNPL use as a substitute for affordable mainstream credit, often by younger or lower-income borrowers.
- Late fees and missed payments accumulating quickly on small balances.
- Lack of credit reporting historically, meaning BNPL borrowing did not show up in mainstream affordability assessments by other lenders.
- Limited dispute resolution for goods bought with BNPL, prior to the extension of Section 75.
Practical implications
For consumers, the practical effects from Regulation Day are:
- Better information at the point of taking out a new BNPL agreement.
- A clear route to FOS for complaints about regulated DPC.
- Section 75 protection where goods are not delivered or are defective.
- A formal expectation that lenders will support customers in financial difficulty.
- Standardised treatment of arrears, including required missed-payment notifications.
For complaints about pre-Regulation Day BNPL, the route is generally narrower and more case-specific. Specific advice on a particular BNPL provider and a specific period is sensible.
Related guides
- What is unaffordable lending?
- The CONC rules on affordability — a plain-English guide
- Which types of credit can be claimed as unaffordable?
- How the Financial Ombudsman handles unaffordable lending complaints
- Do I have an unaffordable lending claim?
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