FCA Consultation on new rules for Deferred Payment Credit (unregulated Buy Now Pay Later)

The new rules will apply to all third-party lenders offering DPC. Retailers who offer their own form of DPC will remain exempt (as well as some limited exemptions remaining in place such as premium finance DPC). Retailers that act as credit brokers for DPC will also remain outside of the regulatory perimeter (although how their DPC lender operates will change). 

Although DPC has commonly been called BNPL, prior to DPC becoming popular, the FCA already had defined a different type of agreement as BNPL (these agreements usually offered an interest-free period after which interest would start to be charged if the customer had not paid off the total outstanding balance). As such, references in the FCA Handbook to BNPL are not relevant to DPC (so don’t get confused) and the FCA needed a new term for the newly regulated loans – DPC.

• Legislation to make DPC agreements regulated and empowering the FCA to regulate DPC lenders was enacted on 14 July 2025
• Consultation closes: 26 September 2025
• Policy Statement: Expected early 2026
• Temporary Permissions Regime (TPR): Opens for registration 2 months before regulation day and will close 2 weeks before Regulation Day

Regulation starts on 15 July 2026. 

DPC agreements will be regulated and all firms that that wish to provide DPC must be authorised by the FCA or have registered for the TPR.

What is it?

The TPR will allow firms who do not currently hold the necessary FCA consumer credit permissions at Regulation Day to continue to operate until the FCA determine their application for authorisation. 

Who is eligible?

The firm must have been a DPC lender when the legislation to regulate DPC was made (i.e. 15 July 2025).

How does a firm enter the TPR?

The firm must have:

• Notified the FCA by specified date (which will be 2 weeks before Regulation Day).

• Paid the FCA the relevant registration fee.

• Provided the FCA with the following information for registration:

  • Evidence that it was carrying out DPC lending as at 15 July 2025.

  • Details including its registered office, principal place of business and trading names.

  • Details of the firm’s controllers and senior managers.

What happens next?

Firms in the TPR will follow the FCA authorisation application process with the usual statutory timelines (6 months for a ‘complete’ application and 12 months for an ‘incomplete’ application). They will be supervised by the FCA when in the TPR (and the FCA can take enforcement action) and they will need to follow all of the new requirements (except regulatory reporting and SMCR). There will be a modified authorised disclosure statement. If successful, there will automatically be a limitation placed on the authorisation limiting the lender to DPC (a variation of permissions will be required for full consumer credit authorisation). 

What happens if a firm does not register for the TPR?

They will not be able to undertake DPC lending from Regulation Day, but if they have unregulated DPC agreements (i.e. DPC agreements entered into before regulation) they will be able to service those agreements for 2 years afterwards (i.e. supervised run off). If firms exit the TPR (i.e. application is declined or withdrawn) the 2 years will start from the date they exit the TPR. 

DPC firms will need to comply with the following existing rules for FCA-authorised firms:

• Threshold Conditions
• Principles for Businesses including the Consumer Duty and guidance for the fair treatment of vulnerable customers (but the FCA will add additional guidance for DPC lenders)
• Systems and Controls sourcebook, as it would apply to any regulated consumer credit lender
• Senior Managers and Certification regime (SMCR) as per solo regulated firms
• Enforcement Guide
• General Provision sourcebook
• The general conduct of business standards in CONC 2, including the general requirements relating to remuneration and performance management (although note the distance marketing rules in CONC 2.7 have been disapplied)

For DPC lenders that are subject to the Payment Services Regulations 2017, they will need to comply with those requirements as well as the new DPC requirements. The FCA has chosen not to make any specific rules for DPC lenders that are subject to the PSRs to make allowance for the fact they are also subject to those regulations. 

Regulatory Reporting for regulated DPC firms will be the same as those for regulated consumer credit firms and same threshold for reporting will apply i.e.:

• Product Sales Data – although there is a tailored implementation to avoid the need for a regulatory “dump” of data on Regulation Day
• Consumer Credit Returns i.e. CCR001(financial data), CCR002 (volumes) and CCR003 (lenders activities)
• Financials crime returns i.e. FIN073, FIN074 and REP CRIM existing threshold are met
• REP008 (Notification of Disciplinary Action) re SMCR
• REP024 applies to firms with permission to approve financial promotions
• REP025 applies to firms with Appointed Representatives

Financial Promotions

• The existing CONC 3 rules that apply for regulated consumer credit lenders will apply to DPC firms.

Creditworthiness

• The existing CONC 5.2A rules that apply for regulated consumer credit lenders will apply to DPC firms, with the FCA stressing the rules will be applied proportionately.
• DPC lenders will need to have adequate governance and systems and controls in place including effective policies and procedures for assessing creditworthiness (including affordability), and will be expected to keep a record of each transaction where credit was granted.
• If AI and open banking are used in supporting lending decisions, then these should be tested to ensure they are producing responsible and sustainable decisions.
• The FCA flags that it is planning to consult on mandatory CRA reporting and this may apply to DPC.
• Repeat lending – DPC lenders will need to meet creditworthiness requirements for every loan, (but can take into account information obtained in previous dealings), with the justification being this is a “fixed-sum agreement” (using the Consumer Credit Act 1974 definition).
• Creditworthiness rules will be extended to small DPC agreements (i.e. those of £50 or less).

Pre-contractual information

• As well as the CCA pre-contractual information requirements not applying, interestingly, the FCA has chosen not to apply the Adequate Explanation requirements to DPC lenders (except for certain information required for continuous payment authorities).
• A new CONC 4.2A will be created, which details the product information requirements for regulated DPC agreements. Before the customer enters into a DPC agreement, lenders will be required to:
  • Provide “Key Product Information”
  • Provide or make available “Additional Product Information”
  • Comply with the current rules for consumer credit lenders relating to giving an adequate explanation of further information about a continuous payment authority (if relevant)
  • Provide or make available the contractual terms and conditions
• If there are joint borrowers, the information needs to be provided / made available to both borrowers.
• “Make available” will require it to be reasonably expected that a customer will know how to access and be able to access the information. This will require an assessment of the target customer and consideration of vulnerable customers.
• As such, there is scope for “layering” of information to customers, to avoid information overload, and tailoring the information given to customers.

DPC agreements entered into by telephone

• If a DPC agreement is taking out via telephone, then the key product information has to be provided orally before the agreement is entered into and the key and additional product information must be provided in a durable medium immediately after the agreement is made.

Entering into the agreement

• The customer must be provided with a copy of DPC agreement, Key Product Information and Additional Product Information in a durable medium after the DPC is entered into. If the Key Product Information and Additional Product Information is included in the DPC agreement, then it does not need to be provided again.

Guarantor loans and Security

• Whilst guarantees and security are not generally a feature of DPC lending currently, it is interesting that, where a security is required (which could include a guarantee), the Consumer Credit Act 1974 requirements on security will apply to DPC lending. The FCA has also decided to include specific information requirements for guarantors in case a firm does offer a DPC agreement that involves a guarantor.

• There are no specific requirements for providing information during the agreement (except in the case of missed payments), which is a departure from how current consumer credit firms are regulated – as they are required to provide certain information under the Consumer Credit Act 1974, such as annual statements.
• DPC lenders are however reminded that, under the Consumer Duty, they will have a duty to ensure consumer understanding and so will be expected to provide timely information throughout the product lifecycle in a form that their target customer will understand and that will help them make informed decisions.

• Monitoring customers
  • The guidance in CONC 1.3 about identifying when customers are in financial difficulties will apply to DPC lenders, as well as the current CONC 6, including the need to monitor customer repayments for sign of actual or possible repayment difficulties.
• Missed payments
  • New rules in CONC 7.20 will be created, which detail information requirements about missed payments, which are expected to be communicated as soon as possible after the customer misses just one repayment
• Default notices
  • The new rules in CONC 7.20 require DPC lenders to give notice before certain actions are taken (such as demanding early repayment or termination).
• Consumer Duty
  • The rules in CONC 7.20 do not specify how such communications should be made, nor do they prescribe the content, but firms are expected under Consumer Duty to ensure that they customer understands what is happening and what may happen, what they need to do and what support they can receive, so customers can make timely and informed decisions.

Complaints will be dealt with similarly to the current rules for regulated consumer credit firms, with DISP applying to regulated DPC lenders.