BNPL regulation: November 29 deadline for industry feedback

The government has announced its latest consultation on Buy Now Pay Later (BNPL) that looks at proposed legislation on providers and e-commerce businesses. The proposed changes will bring BNPL products under the supervision of the Financial Conduct Authority (FCA), introducing stringent new rules to protect consumers and impose greater oversight on providers.

Currently, BNPL products operate largely outside the scope of FCA regulation. This is set to change with the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025, which will incorporate BNPL agreements into the regulated credit market. This legislation aims to ensure consumers are better informed, avoid unaffordable borrowing, and have clear rights when issues arise.

What does regulation mean for BNPL providers?

The new regulatory landscape will require significant adjustments. The introduction of creditworthiness checks and stricter transparency requirements means that as a BNPL provider, you will need to invest in more robust compliance systems. This could involve higher operational costs, but it also presents an opportunity for you to build greater consumer trust through improved governance. As the market evolves, providers who adapt early may gain a competitive advantage by aligning with the new regulatory expectations.

John Pauley, our Financial Services Partner highlights the benefits of the new regulation:

As a BNPL provider, you will benefit from greater regulatory clarity, which will help you to foster consumer confidence and should support the growth and sustainability of your business model.

One key aspect of the proposal is the introduction of a Temporary Permissions Regime. This regime will allow unauthorised BNPL providers to continue operating while they apply for full FCA authorisation. This will prevent immediate market disruption, giving firms time to transition to the new regulatory framework.

In addition to the FCA enforcing rules on creditworthiness and affordability checks, there will be tighter controls on financial promotions. All promotions will need to be approved by authorised persons before being issued.

The FCA’s regulation will formally begin 12 months after the legislation is passed, on what is being termed "Regulation Day." From that point, as a BNPL provider you will be fully subject to FCA oversight and the Consumer Credit Act 1974. This means enhanced consumer protections, including clear disclosure requirements and the ability to take complaints to the Financial Ombudsman Service.

John Pauley, our Financial Services Partner stresses the importance of early preparation:

As a BNPL provider, you should act now to ensure your operations are ready for this regulatory overhaul, like reviewing your compliance frameworks. The shift to an FCA-regulated environment is significant, particularly around creditworthiness assessments and financial promotions. You should seize this opportunity to align your operations with the new rules so that the transition is more seamless.

Ahead of the consultation deadline on 29 November 2024, discover how the proposed BNPL regulation will impact your business. Our Financial Services solicitors can help you prepare for these changes and identify opportunities in a regulated market.

Following the consultation's closure, the government plans to introduce legislation as soon as possible.