On 19 May 2025, HM Treasury (HMT) published its response to the 2024 consultation on bringing buy-now-pay-later (BNPL) products into regulation, setting our its final position on the proposals as well as summarising the feedback received. HMT also confirmed that it would lay the draft affirmative statutory instrument (SI), the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025, for bringing the new BNPL regime into force.

Background

HMT published a consultation paper (CP) in October 2024, setting out its approach to regulating BNPL. The proposals were intended to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.

HMT’s final position

In its consultation response, HMT states that respondents expressed a strong desire for action in this area and were generally supportive of the proposed regulatory regime. On some of the key areas addressed in the consultation, HMT confirms that:

  • Scope: BNPL agreements offered by third-party lenders will be subject to the new regulatory regime, while those provided directly by merchants will remain exempt under Article 60F(2) of the Regulated Activities Order (RAO). HMT also commits to continue monitoring closely the profile of the merchant-provided credit sector and to respond if significant change or potential consumer harm is detected.
  • Disclosure requirements: The disclosure requirements under the Consumer Credit Act 1974 (CCA) will not apply to BNPL products, and instead the Financial Conduct Authority (FCA) will be able to draft rules bespoke to the nature of these products. HMT notes that the FCA will draft and consult on its rules in due course.
  • Other regulatory controls: Financial promotions communicated by unauthorised merchants who offer third party lender BNPL agreements will need to be approved by an authorised person. Firms in the temporary permissions regime will only be able to approve their own promotions, for onward communication by their unauthorised merchant partners. In addition, most credit broking activities relating to BNPL agreements will be excluded from regulation; HMT is considering its approach to activity that is carried out in the home of a customer.
  • Temporary permissions regime (TPR): The Government will legislate for a TPR to ensure BNPL products are brought into regulation as soon as possible, and the FCA will draft and consult on its rules in due course.

Next steps

In terms of next steps, HMT confirms that:

  • It is committed to introducing BNPL regulation as soon as possible.
  • Once the SI is made, the FCA will have 12 months to draft, consult on and finalise its rules for BNPL lending.
  • BNPL products will enter regulation around mid-2026.
  • It has published its next consultation on CCA reform alongside the BNPL consultation response.

Draft legislation

The draft SI to bring the new regulatory regime for BNPL into force – the draft Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 – has been published on legislation.gov.uk, along with a draft explanatory memorandum. This draft instrument amends Article 60F of the RAO and the result is to classify BNPL agreements as regulated credit agreements under Article 60B(3) of the RAO. BNPL agreements are defined as ‘regulated deferred payment credit agreements’ in the draft instrument. As a result lenders offering BNPL products being brought into regulation will be required to seek FCA authorisation to offer them and will be required to comply with the FCA’s rules for BNPL lending. It also introduces a new Article 36FB to the RAO to prevent all merchants offering BNPL agreements needing to seek credit broking authorisation from the FCA.