The Savvy Investor's Guide

Buy Now Pay Later Is About to Be Regulated: What Changes for Shoppers from July 2026

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James Heppe-Smith

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If you have ever paid for something with Klarna, Clearpay, PayPal Pay in 3, Zilch, or Laybuy, you have used Buy Now Pay Later (BNPL). For most of its history in the UK, BNPL has sat in a regulatory grey area: not quite the same as a credit card, not quite the same as a personal loan, and almost entirely outside the Financial Conduct Authority’s rulebook. That changes on 15 July 2026. Registration for the FCA’s Temporary Permissions Regime opens on 15 May 2026, and “Regulation Day” itself lands on 15 July, after which BNPL providers in the UK must follow the same kinds of consumer protection rules that apply to credit cards.

Here is what is actually changing, what stays the same, and what to expect at the BNPL checkout from this summer onwards.

The short version

  • 15 May 2026: the FCA opens the Temporary Permissions Regime (TPR). BNPL providers that were already operating before 15 July 2025 can register for the TPR (one-off £280 fee) and continue to operate while their full FCA authorisation is processed.
  • 1 July 2026: the registration window for the TPR closes.
  • 15 July 2026 (“Regulation Day”): BNPL is formally regulated. Firms in the TPR must follow most FCA consumer credit rules from this date, including affordability assessments, clear pre-contract information, and forbearance for customers in financial difficulty.
  • By mid-January 2027: firms in the TPR must submit their full FCA authorisation application (within six months of Regulation Day).
  • The protections that come with regulation: affordability checks before lending, the Financial Ombudsman Service route for complaints, regulated treatment of financial difficulty, clearer information before you commit, and supervision of marketing.
  • What stays the same: BNPL itself is still an interest-free instalment product at point of sale. The fundamental customer experience does not change.

What BNPL is and how it grew without much regulation

Buy Now Pay Later, or “Deferred Payment Credit” (DPC) in the FCA’s preferred technical term, is a short-term, usually interest-free credit product offered at the point of sale. The most common formats:

  • Pay in 3 (or 4): split the purchase into three or four equal instalments, due over six to eight weeks. No interest if you pay on time. Late fees may apply.
  • Pay in 30 days: defer the whole amount for 30 days. No interest if you pay on time.
  • Longer instalment plans (6 to 36 months): sometimes interest-free, sometimes not. These typically already fell within existing FCA consumer credit rules if they involved interest.

The reason most BNPL has been unregulated until now is a specific carve-out in the Consumer Credit Act 1974 (Article 60F(2) of the Financial Services and Markets Act 2000 Regulated Activities Order) for interest-free credit repaid in 12 or fewer instalments within 12 months. That carve-out was originally drafted with shops offering instalment payment plans on furniture or electronics in mind, decades before BNPL apps existed. BNPL providers fit through it because their headline products are interest-free and short-term, even though the user experience is closer to a credit card.

By the early 2020s, BNPL had grown to the point that the UK government and the FCA decided the carve-out was no longer fit for purpose. A Treasury consultation in 2021 and a series of regulatory papers since then led to the Consumer Credit (Regulated Agreements) (Amendment) Order 2025 and the FCA’s final rules in policy statements PS25/9, with the Regulation Day fixed at 15 July 2026.

What changes for consumers from 15 July 2026

Affordability checks before you can use BNPL

FCA-regulated lenders must carry out a proportionate creditworthiness assessment before advancing credit. For BNPL, this will not look like a full mortgage-style affordability check; it will be calibrated to the size of the agreement (often £30 to £200) and the term (often six weeks). In practice, expect:

  • A soft credit check that does not affect your credit score, used to confirm identity and check that the customer is not in obvious financial distress.
  • Internal checks on your previous use of that BNPL provider (existing late or missed payments may block new transactions).
  • Greater scrutiny on higher-value purchases or on customers building up multiple parallel BNPL plans across providers.

The practical effect: at the higher end of BNPL usage (multiple plans, larger ticket items), more customers will be declined or asked to provide additional information. At the lower end, the experience may be almost unchanged.

Clearer pre-contract information

FCA rules require regulated credit providers to display key information in a standardised way before the customer commits. For BNPL that means:

  • The total amount payable and the instalment schedule, shown clearly.
  • The consequences of missing a payment, including late fees and the possibility of the debt being passed to collections or affecting your credit file.
  • A statement of the customer’s right to withdraw within 14 days under the Consumer Credit Act 1974.

Some of this is already standard at BNPL checkouts, but consistency across providers and prominence (rather than buried in terms and conditions) is the change.

Financial Ombudsman Service access for complaints

One of the biggest practical wins for consumers. From 15 July 2026, if you have a dispute with a BNPL provider that you cannot resolve directly, you will be able to escalate to the Financial Ombudsman Service (FOS), free of charge. FOS can adjudicate disputes about whether the credit was properly assessed, whether the provider treated you fairly in financial difficulty, whether information was clear, and other consumer protection questions.

Until now, BNPL disputes have generally had to be resolved with the provider directly, or via small claims court if necessary, with no equivalent of the FOS path that credit card users have had for decades.

Better treatment in financial difficulty

FCA rules on forbearance require lenders to treat customers in financial difficulty fairly. In practice this means:

  • Reasonable repayment plans (extending the instalment term, freezing late fees, accepting partial payments).
  • Suspending interest or late fees where appropriate.
  • Signposting to free debt advice services (StepChange, Citizens Advice, National Debtline).
  • Not adding excessive late fees that compound the problem.

Many BNPL providers already follow some forbearance principles, but the new rules make these expectations consistent and enforceable.

Section 75 protection on credit card-funded BNPL

Section 75 of the Consumer Credit Act 1974 makes credit card providers jointly liable with retailers for purchases between £100 and £30,000 paid for using a credit card. When BNPL becomes a regulated credit product, the question of whether Section 75 applies to BNPL purchases themselves becomes clearer: BNPL is itself a regulated credit agreement post-15 July 2026, and faulty-goods or non-delivery claims may be addressable through the BNPL provider as well as the retailer.

The exact application is complicated and depends on the specific BNPL product structure. The headline: more consumer protection on BNPL purchases than before, similar in shape to credit card protection.

Marketing rules

BNPL advertising will fall under the FCA’s financial promotions rules. Expect:

  • Clearer risk warnings on adverts and at checkouts.
  • Balanced presentation of benefits and downsides.
  • Stricter controls on influencer and social media promotion (a major channel for BNPL marketing).

What is staying the same

  • BNPL is still interest-free at the point of sale. The fundamental product economics do not change.
  • It is still available at most major UK retailers. Providers that register for the TPR can continue to operate without interruption.
  • Late fees will still apply. Regulation does not abolish late fees; it just requires fair treatment of customers in difficulty.
  • BNPL still reports to credit reference agencies. Most providers already report BNPL to Experian and Equifax, and your credit file is affected by how you handle BNPL payments.
  • You can still use BNPL for online and in-store purchases. The checkout experience will look broadly similar, with the regulatory information layered in.

What to expect at the checkout from August 2026

A reasonable customer-facing description of the post-Regulation Day BNPL flow:

  1. You add an item to your basket and select BNPL at checkout.
  2. The provider runs a soft credit check (this does not affect your credit score) and looks at your history with them.
  3. If approved, you see a clear breakdown of the instalment schedule, total amount, late-fee policy, and your right to withdraw within 14 days.
  4. You agree, the purchase goes through, and the schedule is set up against your chosen payment method.
  5. If something later goes wrong with the goods, with payment, or with how you are treated, you have a path to complain to the provider and then to FOS.

For the vast majority of users with stable finances and one or two BNPL plans at a time, the experience is much like today. The visible difference is the new information at the screen and the new options if something goes wrong.

What it might mean for heavier BNPL users

Customers who run multiple BNPL plans at once, or who have a recent history of missed payments, are the population the new affordability rules are most likely to affect. Expect:

  • Higher rejection rates at checkout where the customer has several existing BNPL plans across providers.
  • Lower per-transaction limits for newer customers.
  • More signposting to free debt advice for customers showing financial-difficulty indicators.

The FCA’s stated objective is to keep BNPL accessible for the vast majority of consumers while reducing harm to the minority who are using it as a way to fund spending they cannot afford. Whether the rules achieve that balance will become visible in market data through late 2026 and into 2027.

Which BNPL providers are likely to be in the TPR

The Temporary Permissions Regime is open to firms that were already conducting Deferred Payment Credit activity in the UK on or before 15 July 2025. The major operators expected to register include:

  • Klarna (the largest UK BNPL provider by transaction volume).
  • Clearpay (Block’s BNPL arm, formerly Afterpay’s UK brand).
  • PayPal Pay in 3 (the BNPL product within PayPal).
  • Zilch (UK-based, hybrid BNPL/cashback).
  • Laybuy (UK and New Zealand operations).
  • A range of smaller and specialist providers (Tabby, Splitit, and merchant-funded plans run through partner lenders).

Firms that do not register for the TPR by 1 July 2026 lose the ability to operate as BNPL providers in the UK from 15 July 2026 onwards, unless they were already FCA-authorised under a different permission. The FCA has been clear that consumers using a provider that fails to register would not lose existing legal protections on agreements already entered into, but would not be able to enter new BNPL agreements with that provider.

FAQ

Will BNPL start charging interest after 15 July 2026?

No. The BNPL products that are headline interest-free remain interest-free. Regulation does not change the product economics. What changes is the consumer protection layer around the product, including affordability checks, FOS access, and clearer information.

Will it affect my credit score?

Most BNPL providers already report to credit reference agencies (Experian and Equifax in particular). What changes from 15 July 2026 is the consistency of those reporting practices and the inclusion of BNPL in formal affordability assessments by other lenders. If you handle BNPL well, it can contribute positively to your credit file. If you miss payments, the negative impact will be more uniformly reflected.

Can I still use BNPL if I have a low income or limited credit history?

The FCA’s affordability rules require a “proportionate” assessment, which means the checks for a £50 Pay-in-3 purchase will be much lighter than for a £2,000 longer-term plan. Lower-income consumers and those with limited credit history will still have access to BNPL for typical small-ticket purchases. The intent of the rules is to protect consumers from accumulating unmanageable BNPL debt across multiple providers, not to lock low-income customers out of the product entirely.

What if my BNPL provider fails the FCA authorisation later?

Providers in the TPR have until mid-January 2027 to submit their full authorisation application. If the FCA decides not to authorise a provider, that provider would have to wind down its UK BNPL operations. Existing agreements would typically be honoured (the contract terms continue to apply) and your protections under the regulated agreement would carry over until the agreement is closed out.

Will I be charged retroactively for old BNPL purchases?

No. Regulation Day rules apply to BNPL agreements entered into from 15 July 2026 onwards. Existing agreements continue under their original terms. The regulatory consumer protections (such as FOS access for complaints) become available for new agreements first, and the FCA has indicated some retrospective access to FOS may apply for certain complaints brought after Regulation Day.

Does this apply to BNPL on credit cards?

“Plan it” or instalment features within credit cards have always been regulated, because credit cards themselves are regulated products. The new rules target the standalone BNPL products from Klarna, Clearpay, and similar providers. If you use the instalment feature within your credit card app, the rules governing that product have not materially changed.

Where to go from here

This article explains the FCA’s incoming Buy Now Pay Later regulation as of 13 May 2026. It is general information, not personal advice. Your decision about whether to use BNPL should reflect your own financial circumstances; if you are struggling with BNPL or other debt, the free services above can help.

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