HM Treasury has published its response to the October–November 2024 consultation and a draft affirmative order to bring currently unregulated Buy-Now, Pay-Later (BNPL) products into Financial Conduct Authority (FCA) regulation. The proposal focuses on interest-free instalment credit offered by third-party lenders and would require firms to be authorised and supervised by the FCA, with consumers gaining access to the Financial Ombudsman Service and key statutory rights such as Consumer Credit Act section 75. To tailor the regime to short-term, digital credit, the draft order would disapply a range of Consumer Credit Act information and notice requirements for these BNPL agreements so the FCA can set disclosure, affordability and creditworthiness, and arrears-handling rules through its Handbook and the Consumer Duty. Merchant-provided instalment credit would remain outside scope, with exemptions also maintained for insurance premium finance, certain employer-related lending (including group entities), and lending by registered social landlords. Most merchants offering third-party BNPL at checkout would be excluded from credit broking authorisation, but domestic premises suppliers would remain within credit broking regulation, and unauthorised merchants’ BNPL financial promotions would need approval by an authorised person. Firms using the Temporary Permission Regime (TPR) would be exempt from the Senior Managers and Certification Regime while in the TPR. Implementation is structured in two stages, with an initial commencement date enabling FCA and ombudsman scheme preparation and creation of the TPR, followed by a regulatory commencement date 12 months later when BNPL becomes a regulated activity. HM Treasury expects BNPL products to enter regulation around mid-2026, and the FCA is expected to consult on its detailed rules and open TPR registration during the transition.

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