The Financial Services and Markets Act 2000 (Regulated Activities etc) (Amendment) Order 2025 (SI 2025/859) (the "Order") has been made.
Buy Now, Pay Later ("BNPL") is a type of interest-free credit which allows borrowers to split the cost of purchases in up to 12 regular repayments not exceeding a 12-month period. The Order will bring interest-free BNPL agreements into regulation under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO).
Until now, BNPL had been classified as unregulated credit. Lenders relied upon the exemption in article 60F(2) of the RAO and were not required to obtain authorisation from the FCA to offer these agreements, follow FCA rules for consumer credit lending, or comply with any provisions of the CCA.
The Order aims to address lending practices that could potentially harm consumers. Once BNPL products – referred to as regulated deferred payment credit agreements in the Order - enter regulation, lenders offering them will need to be authorised by the FCA. Merchants using third party lenders to provide BNPL when introducing customers for credit will need to get their communications, which will constitute financial promotions, approved and this would typically be done by the lender. Consumers will additionally have access to a wider range of protections, including the use of the Financial Ombudsman Service for redress.
BNPL agreements will be subject to a tailored application of the Consumer Credit Act 1974 (CCA). Most provisions in the CCA related to information disclosure are disapplied for BNPL agreements by the Order. This change will allow the FCA to develop information disclosure rules specifically for BNPL lending to ensure consumers have access to clear and accessible information about their BNPL agreements.
The Order also introduces a new exemption from article 36A of the RAO (regulated activity of credit broking), ensuring that most merchants (eg e-commerce websites) are not subject to credit broking regulations when they refer customers to third-party BNPL providers (for example, offering a third-party BNPL product at checkout, not their own finance product).
The temporary permission regime came into force on 15 July 2025, and the Order comes into force on 15 July 2026 for all other purposes.
Merchants offering BNPL themselves (not through a third party), agreements to finance premiums under contracts of insurance, loans to employees under an agreement between the employer and a supplier, and certain agreements offered by a registered social landlord will still be able to benefit from the 60F(2) exemption under the RAO.
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