The FCA has published a consultation paper (CP25/23) on how it proposes to regulate what will become known as deferred payment credit (DPC). DPC is one form of what is currently unregulated buy-now-pay-later (BNPL) credit, and is where a third-party lender funds the credit in a borrower-lender-supplier relationship.
This follows the response issued by HM Treasury in May 2025 to its earlier consultation on the regulation of BNPL credit in late 2024. The response established that the government did not intend to regulate BNPL credit where the credit is provided by the supplier of the goods or services (the merchant).
DPC will fall within FCA regulation from 15 July 2026 (Regulation Day) following an amendment to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the RAO).
What is DPC?
DPC refers to an interest-free credit product, repayable in twelve or fewer instalments over twelve months or less, and which is currently exempt from regulation under article 60F(2) of the RAO.
FCA concerns
The FCA's consultation highlights that where DPC products work well, they offer consumers access to credit that is both affordable and a convenient way to spread payment for goods and services.
However, there are concerns that DPC borrowers may not be getting sufficient information about the DPC agreements they are entering into, particularly around charges if they miss payments. There are also concerns that insufficient checks are being undertaken on borrower affordability.
This is relevant in the context of borrowers entering into multiple DPC agreements (though of relatively low value), and being more likely to be in financial difficulty compared with the general population. The BNPL industry reacted well in advance of the HMT and FCA consultations to improve the supply of information to borrowers and affordability checks. However, the FCA is proceeding with regulation of DPC nonetheless.
The two main proposals for regulation
Information requirements (from para 3.9 onwards)
The FCA's proposal is not to apply the information requirements that otherwise apply to regulated credit agreements, as these are not considered to be proportionate, promote good customer outcomes or assist customer understanding of DPC.
The FCA wants to help consumers make effective, timely and informed decisions about DPC borrowing before they enter into their agreement, and throughout the life of their agreement. This will include a requirement on firms to proactively give a customer certain information in a prominent way (the key product information), and then give or make available other specific pieces of information to a customer (the additional product information), all before the customer enters into the DPC agreement.
The proposed key product information is listed at para 3.32 and includes:
- the rate of interest (0%);
- the amount of credit;
- the number and frequency of payments (including dates, where known);
- the amount of each payment;
- the cash price of the goods or services being financed; and
- the consequences of missing payments, including charges for late or missed payments, the amount of those charges, and the risk of an impaired credit rating.
The additional product information needs to be easily accessible for customers, but does not have to be proactively given during the customer journey. The information includes:
- the name of the merchant;
- further detail on rights of withdrawal and cancellation/early repayment rights;
- more information about the consequences of missing payments;
- an explanation of the protections available under section 75 (or 75A) of the CCA; and
- the contractual terms and conditions.
Assessing creditworthiness and affordability (from para 3.76 onwards)
The FCA proposes to apply the existing rules on creditworthiness in CONC 5.2A, which will allow lenders to have a reasonable degree of flexibility in how they assess creditworthiness, and which should be proportionate to the individual circumstances of each case.
The FCA acknowledges at para 3.81 that, as an interest-free product which generally involves small value loans over short periods, DPC might pose a lower risk than some other credit products. However, it also recognises that many DPC customers display characteristics of vulnerability, low financial resilience and have poor credit histories. The FCA therefore emphasises the CONC 5.2A33R requirements to establish, implement and maintain clear and effective policies and procedures for assessing creditworthiness, including affordability, and the need to periodically review the effectiveness of those policies and procedures and address any deficiencies.
Other considerations
The consultation goes on to detail other areas of the FCA Handbook that will apply to DPC lending, including the Senior Managers & Certification Regime and PRIN. It discusses extensively how the FCA's Consumer Duty principle will apply, as part of its principles-based approach to regulation.
It sets out proposals on the temporary permission regime (TPR) which follows familiar ground. Firms can notify their intention to register for the TPR from two months before Regulation Day – so from around 15 May 2026. DPC borrowers will be able to refer complaints to the Financial Ombudsman Service.
DPC regulation will not apply retrospectively, and so DPC agreements made before Regulation Day on 15 July 2026 will remain unregulated.
Next steps
The FCA's consultation is open for responses until 26 September 2025, and the FCA will respond with a policy statement early in 2026 with "made rules" coming into force on 15 July 2026.
Contact
Please contact John Lunn, who heads MFMac's Consumer Finance team, if you would like more detailed guidance on the FCA's consultation or the draft rules and handbook text in Appendix 1, or what it will mean for you to be an FCA-authorised and regulated firm as a DPC lender.
