The FCA consulted on regulation of deferred payment credit (DPC, by public convention known as buy now, pay later or BNPL). The Government has legislated to bring BNPL within FCA regulation beginning from summer 2026. In this consultation, the FCA sought feedback on its draft rules and guidance for BNPL firms.
StepChange campaigned for and welcomed the Government’s commitment to BNPL regulation. BNPL is useful to many consumers: it offers an accessible form of income smoothing for retail expenses, with fixed repayments on a clear schedule over a short timeframe and is interest-free. However, concerns have been raised by StepChange and the wider consumer sector about:
- risks of unaffordable lending and the impact of late fees on consumers in difficulty;
- low consumer understanding of BNPL as a form of credit;
- product placement and low friction design that encourages consumers to spend more than they mean to; and
- inconsistent support for borrowers in difficulty.
We are broadly supportive of the FCA’s proposed approach to regulation but highlight concerns about potential ambiguities in the application of creditworthiness and affordability rules to BNPL and the FCA’s proposed approach to post-contractual information.
It is relatively common for consumers to ‘stack’ BNPL loans and, at present, the FCA’s rules look poorly specified for this kind of repeat and concurrent lending by individual firms. This risks ambiguity that leads to unaffordable lending. From a problem debt perspective, identifying where affordable lending transitions into unaffordable lending is critical. Where BNPL interacts in novel ways with the FCA’s rules, we want the regulator to set clearer expectations and avoid an excessively unclear approach that risks poor outcomes for customers.
We also note concerns about proposed rules on post-arrears communications. The FCA states it wants firms to provide information about sources of free debt advice to customers that have missed repayments, and to provide information to customers that miss repayments at the right time in a standardised form. We do not think that the rules as drafted will deliver those objectives and have called for the FCA to be more prescriptive in the timing and content of post-arrears communications while retaining sufficient flexibility for firms to design effective approaches to engaging customers in difficulty.
We would also like to see the FCA go further to develop its expectations of firms whose products, like BNPL, pose higher risks of exploiting behavioural bias to the detriment of consumers. The Consumer Duty introduced new rules that require firms to avoid causing foreseeable harm, including through exploiting consumer behavioural bias or vulnerability. Those rules and guidance now need articulating in a form that sets clear expectations for firms, including BNPL providers.