PayPal Pay In 3 Unaffordable Lending Complaints
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.
PayPal Pay in 3 is PayPal’s entry into the Buy Now Pay Later market — splitting eligible purchases into three monthly interest-free instalments. Like the other major BNPL operators, it has been outside the Consumer Credit Act until now, but comes under FCA regulation from 15 July 2026 for new agreements. This page explains the complaint route for both pre- and post-Regulation Day Pay in 3 lending.
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About PayPal Pay in 3
PayPal launched Pay in 3 in the UK in October 2020, leveraging its existing payment platform infrastructure and 30+ million UK customer base. The product is offered at checkout on retailers that accept PayPal, allowing the customer to split a purchase into three monthly payments with no interest. PayPal pays the merchant in full at the point of sale and collects from the customer over the following three months.
PayPal (Europe) S.à r.l. et Cie, S.C.A. is the entity that historically operated PayPal’s UK consumer-facing services. PayPal also holds UK FCA authorisations for various regulated payments and credit activities. The Pay in 3 BNPL itself has been unregulated.
Regulatory position
Pay in 3 is deferred payment credit (DPC) — interest-free credit repayable in three or fewer instalments over a few months. From 15 July 2026, DPC offered by third-party lenders becomes regulated. PayPal will need to either be fully authorised for DPC lending or hold a Temporary Permissions Regime registration to continue offering Pay in 3 from that date.
Pre-Reg-Day Pay in 3 agreements remain unregulated. The CONC framework does not apply, and the FOS compulsory jurisdiction over the activity does not apply to them.
Where complaints stand
Pay in 3 agreements from 15 July 2026 onwards
Subject to standard CONC 5.2A creditworthiness assessment, DISP complaints rules, FOS access, and Section 75 protection. Where the lending was unaffordable on a reasonable and proportionate assessment, the standard complaint route applies.
Pay in 3 agreements before 15 July 2026
Unregulated. Pre-Reg-Day BNPL falls outside the standard complaints framework. PayPal may consider complaints under its own internal process and voluntary standards, but there is no compulsory CONC or FOS route. Where the wider relationship raises issues capable of supporting a Section 140A unfair relationship claim, the court route remains available.
Common patterns
Pay in 3 sits alongside other PayPal services on the customer’s account, which can sometimes complicate the affordability picture. Issues that have come up in BNPL complaints generally:
- Multiple Pay in 3 agreements running concurrently, with no clear total exposure visible to the customer.
- Repayments collected automatically from the linked payment method, with limited friction or affordability prompts.
- Late fees on missed payments compounding small underlying amounts.
- PayPal Pay in 3 alongside other BNPL operators (Klarna, Clearpay, Zilch), each unaware of the others.
- Vulnerability indicators not identified or acted on, where they would have been visible from the account history.
How a claim works (post-Regulation Day)
For agreements from 15 July 2026 onwards:
- Subject Access Request to PayPal covering the Pay in 3 history and any wider account context.
- Bank statements and credit-file information for the affordability picture.
- Complaint to PayPal — eight-week response window applies.
- Escalation to FOS if needed.
- Redress if successful — refund of fees and charges, 8% statutory interest, credit-file correction.
Frequently asked questions
Does Section 75 cover my PayPal purchase?
Section 75 has not applied to Pay in 3 prior to 15 July 2026, but may apply to other PayPal products that are regulated credit. From Regulation Day, Section 75 applies to DPC agreements. For purchases through PayPal balance or PayPal Credit (separate products), different rules apply.
Will my Pay in 3 history affect my credit file?
BNPL providers progressively began reporting payment data to UK credit reference agencies from 2023, with on-time payments and missed payments potentially appearing on your file. The exact reporting practices vary by provider and over time.
Related guides
- BNPL and the new FCA rules from July 2026
- Buy Now Pay Later claims hub
- The CONC rules on affordability
- How the Financial Ombudsman handles unaffordable lending complaints
- Do I have an unaffordable lending claim?
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