Buy now pay later rules: what retailers need to know

Since 15 July 2026, buy now pay later (BNPL) plans from third-party lenders have been regulated by the Financial Conduct Authority (FCA). If your shop, salon or website offers BNPL at the till or checkout, you do not need FCA authorisation yourself, but the lender you work with does, and that changes what your customers see, what protections they have and how secure your payment option is.

Photo: ArtAmbient boutique interior Arta by Steffen Mokosch, CC BY-SA 4.0, via Wikimedia Commons

This is the first Christmas trading season under the new rules, so it is a good moment to check that the BNPL option you rely on is set up properly and that your shop's own wording keeps pace with it.

What has changed

The FCA now calls this type of product "Deferred Payment Credit". In plain terms, it covers the interest-free "pay in 3" or "pay later" plans that customers pick at checkout, where the lender is a different business from the one selling the goods.

From regulation day, the main changes are:

• Lenders need permission. A BNPL lender must be authorised by the FCA, or registered in its temporary permissions regime, to enter new agreements. Doing so without either is a criminal offence.
• Affordability checks. Lenders must check whether a customer can afford to repay before the agreement starts.
• Clearer information. Before a customer signs up, the lender must set out the amount borrowed, when and how much they will repay, any late fee and their rights.
• Help when things go wrong. Lenders must contact customers who miss a payment, support customers in financial difficulty and handle complaints, with access to the Financial Ombudsman Service if a complaint is not resolved.
• Refund rights. Section 75 of the Consumer Credit Act now applies, so a customer can claim against the lender, as well as against you, for faulty or undelivered goods. Grant Thornton notes this applies to purchases over £100.

Agreements made before 15 July 2026 stay unregulated, and lenders can carry on servicing them.

What this means for your business

The law draws a clear line. The FCA's own guide says BNPL is regulated when the lender and the seller are different businesses. If you offer your own "pay later" terms directly, that is not covered by this regime.

For most small retailers using a third-party provider, the practical effects are:

• Your checkout may look different. Lenders now have to show more information before a customer commits. Law firm Lewis Silkin points out that lenders will in practice expect merchants to display or build in lender-required wording, online and in store.
• Some customers may be declined. Affordability checks apply to every agreement, whatever its value. A customer who could use BNPL before may now be turned down, so have another way to pay ready, such as card or contactless.
• Your partner has to stay in the regime. Firms in the temporary permissions regime have six months from 15 July 2026 to apply for full authorisation. A provider that drops out may have to stop offering new plans, which could leave a gap at your checkout.
• Your own wording still matters. As a merchant you sit outside the FCA perimeter for BNPL, but consumer law still applies to your sales journey. Product pages, social posts and till signs that mention "pay later" need to be fair, clear and not misleading.

Five checks to make before the Christmas rush

1. Confirm your provider's status. Search for your BNPL lender on the FCA Firm Checker, or on the FCA's list of firms in the temporary permissions regime.
2. Ask for the regulation-day pack. Request your lender's updated merchant terms, required wording and any technical changes to the checkout or till integration.
3. Map every place BNPL appears. Check your website checkout, order confirmation emails, product pages, social posts and in-store signs. Remove anything that suggests BNPL is guaranteed or "no checks".
4. Brief your staff. Make sure the team knows that the customer's agreement is with the lender, that the lender may decline it, and where to send complaints.
5. Keep a fallback ready. Make sure your card machine and online card payments are working, so a declined BNPL application does not become a lost sale.

Frequently asked questions

Do I need FCA authorisation to offer BNPL in my shop?

Not if you offer a third-party lender's plan at checkout. Shops that simply offer these plans as a way to pay are exempt from needing authorisation. The lender needs to be authorised or in the temporary permissions regime.

Can a customer still use a BNPL plan they took out before July?

Yes. Agreements made before 15 July 2026 stay unregulated and the lender can keep servicing them. The new protections apply to agreements made on or after that date.

What happens if a customer complains about a BNPL purchase?

They should go to the lender first, and can then take it to the Financial Ombudsman Service. Section 75 means the lender can also be liable for faulty or undelivered goods, so check your merchant agreement for how the lender handles these claims with you.

Get your checkout ready for Christmas

BNPL is one payment option. A reliable card machine and a clear card fee deal matter just as much in peak season. We help UK businesses compare card machines, set up and train staff on Square POS, and book a free card fee review to see what you pay today. If you need funding for Christmas stock, we can also look at business finance options for you.

Call or WhatsApp 07777 175890.

Jos Finserv Ltd (company no. 14560046) is an independent broker. For business finance we are a credit broker, not a lender, and we may receive commission from providers. Approval and terms depend on your trading history. No obligation.

Sources

• FCA: Buy now pay later – what you need to know
• FCA: PS26/1 Regulation of Deferred Payment Credit
• Lewis Silkin: BNPL regulation – what businesses offering BNPL need to know
• Freshfields: UK BNPL regime – FCA publishes final rules
• Grant Thornton: Buy now pay later – FCA consults on final rules
• Retail Insight Network: UK brings buy now pay later under full FCA oversight