The UK Government has formally announced the long-awaited legislation to regulate the Buy Now, Pay Later (BNPL) market, following sustained concerns over unchecked growth, consumer harm, and rising debt levels. With over 10 million UK users and minimal regulatory safeguards to date, BNPL has operated in a significant blind spot. The draft legislation, titled the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025, was laid before Parliament on 19 May 2025 and is expected to come into force in 2026. The Financial Conduct Authority (FCA) will lead on implementation, bringing BNPL firms under its supervision and aligning them with the standards applied to other consumer credit products. The reforms aim to embed affordability checks, redress mechanisms, and much-needed clarity for both firms and consumers.

Key Regulatory Changes

 1. FCA Regulation of BNPL Providers

• BNPL firms will be brought under the supervision of the FCA, aligning them with other consumer credit providers.

• Providers must obtain FCA authorisation to operate legally.

2. Mandatory Affordability Checks

• Lenders are required to conduct thorough affordability assessments before extending credit to consumers.

• This measure aims to prevent consumers from accumulating unmanageable debt.

3. Enhanced Consumer Protections

• Consumers will have the right to escalate complaints to the Financial Ombudsman Service.

• BNPL agreements will fall under Section 75 of the Consumer Credit Act, offering protections similar to credit card purchases.

4. Transparency in Terms and Conditions

• BNPL providers must clearly disclose any fees, charges, and the potential impact on consumers' credit scores.

• Marketing materials should accurately represent the nature of BNPL products.

5. Revisions to Exemptions

• The current exemption under Article 60F(2) of the Financial Services and Markets Act 2000 will be narrowed.

• Third-party BNPL providers will no longer benefit from this exemption, ensuring they are subject to regulatory oversight.

Timeline and Industry Preparation

The FCA is expected to open a consultation between June and September 2025, with full implementation anticipated in 2026.

How PPL is Supporting Clients

Announcement – Communicating key changes and implications across our network and to BNPL providers.
Engagement Plan – Preparing for the FCA consultation period and supporting client input.
Policy Alignment – Reviewing current credit, governance, and marketing frameworks in line with anticipated regulatory standards.
Training & Awareness – Delivering targeted sessions on Financial Promotions, Product Oversight, and Complaints Handling.
Consumer Duty Review – Ensuring alignment with Consumer Duty obligations, particularly regarding “foreseeable harm” and “support for vulnerable customers.”

At Product Partnerships, we’re here to help firms navigate these regulatory changes, manage compliance risks, and prepare for the future of responsible BNPL.