On 17 October 2024, HM Treasury (HMT) issued a consultation paper which sets out the government’s approach to regulating buy now pay later (BNPL) in more detail. It also responds to the feedback that HMT received to its previous consultation that ran between February 2023 and April 2023. There has also been published a draft statutory instrument (SI), The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025.
Policy
In chapter 2 of the consultation paper HMT asks for feedback on draft legislation that will deliver on the government’s policy. The chapter sets out the government’s position on:
- Scope: the government is capturing third-party lenders offering deferred payment credit (DPC) agreements but to ensure consumers have continued access to useful and low-cost forms of credit, agreements such as those facilitated by employers or registered social landlords will remain outside regulation.
- Disclosure requirements: the government does not intend to apply disclosure requirements in the Consumer Credit Act 1974 (CCA) to newly regulated agreements. The FCA will be able to use its rulemaking powers to develop an appropriate disclosure regime in line with the Consumer Duty that will maximise consumer understanding.
- Other regulatory controls: the government intends to ensure that financial promotions communicated by unauthorised merchants who offer third party lender BNPL agreements will need to be approved by an authorised person and that credit broking activities that relate to BNPL agreements will be excluded from regulation unless the activity is carried out in the home of a customer.
- Temporary Permissions Regime (TPR): recognising the need to act urgently, the government intends to legislate for a TPR to ensure BNPL products are brought into regulation as soon as possible. A TPR allows unauthorised firms to continue to operate their BNPL lending until their application for full authorisation has been processed.
In chapter 3 HMT discusses the regulatory and non-legislative controls that, though not covered in the draft SI, are expected to apply to BNPL agreements once regulated. This includes Financial Ombudsman Service protection and the ability for the FCA to make rules, including on appropriate creditworthiness and affordability assessments.
Next steps
The deadline for comments on the consultation is 29 November 2024.
Once the consultation is closed the government will consider the feedback received. It will look to lay the necessary SI as soon as Parliamentary time allows. The SI will set a ‘Regulation Day’, at which point BNPL products will become regulated. In the draft SI, the ‘Regulation Day’ is 12 months from the SI being made. In the intervening period, the FCA will consult upon and finalise new rules to apply from ‘Regulation Day’. During this period, there will also be a window for firms to register for the TPR.