Countdown to Regulation Day for Buy-now-pay-later (BNPL) firms

On 19 May 2025, HMT published its Consultation Response on bringing unregulated BNPL agreements into the FCA’s regulatory perimeter. The Response follows the October 2024 Consultation and Draft Legislation and largely confirms the original proposals with only minor adjustments.

The countdown to “Regulation Day” has begun which means within the next 12 months, the FCA will have to design, consult, and finalise its rules on BNPL lending. Most of the substance of the new regime will be left to the FCA to shape, and firms will need to wait until the FCA’s consultation for details. However, with the confirmation that BNPL firms will be subject to Duty requirements, navigating compliance with the new regime will not be a trivial task. The Government will also legislate on a temporary permissions regime (TPR) to allow firms a period of two years from Regulation Day to continue operating while they obtain their authorisation.

Between the FCA’s Consultation and “Regulation Day”, BNPL firms will have a short time window to evaluate how the new BNPL regime will impact their business models and determine if authorisation is required. Irrespective of whether authorisation is required (e.g. for firms that already hold existing Consumer Credit permissions), firms will need to take steps to effectively prepare to ensure that they have robust processes, systems, frameworks, and resources in place to support regulatory compliance and to evidence the delivery of good customer outcomes.

Below we attach a report that highlights the key developments, timelines for the regulation of BNPL and key actions firms should be considering now in preparation for regulation day:

Click here to download the report