The DPC Frontier: FCA Charges Ahead on Regulating Buy Now, Pay Later

In our previous blog post (here) on Buy Now, Pay Later (BNPL), we examined the UK Government’s proposals to bring interest-free Buy Now, Pay Later (BNPL) products within the scope of regulation. Those proposals marked a clear shift towards formal oversight of a market that had, until then, been subject to only very light regulation. Since then, the regulatory direction has continued to take shape. On 18 July 2025, the FCA published a consultation paper (CP25/23), setting out its propose regime for regulating “Deferred Payment Credit” (or DPC), the new regulatory term for BNPL. This follows the government’s enactment of the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 (the Amendment Order) just days earlier on 14 July 2025, bringing DPC within the FCA’s perimeter. 

In this blog post we consider the key areas of the FCA’s proposals, and what regulated status will mean for firms operating in the DPC space. 

Deferred Payment Credit: the new name for a familiar product

While the term may be new, DPC captures the core features of what is commonly known as BNPL: interest-free credit, repayable in 12 or fewer instalments in 12 months or less, which is currently exempt from regulation. However, the  Amendment Order changes this by providing for DPC to become a type of regulated credit agreement. As a result, regulated activities such as entering a regulated credit agreement and exercise of lenders’ rights and duties under a regulated credit agreement will include those activities as they relate to regulated DPC agreements. However, merchants who broker DPC agreements (by offering them as a payment method) will remain exempt from the requirement to be authorised to provide credit broking. 

FCA Authorisation and Temporary Permissions Regime (TPR)

From 15 July 2026, all firms carrying out DPC activities will need to be authorised by the FCA. To ensure continuity for firms and consumers, the Amendment Order establishes a Temporary Permissions Regime (TPR), allowing firms that do not currently hold the relevant consumer credit permissions to continue operating while the FCA assesses their authorisation applications. This includes both firms that are not currently authorised for any regulated activities and authorised firms that do not presently hold the necessary credit permissions. 

Firms without the relevant permissions that wish to continue DPC activities under the TPR will need to notify the FCA before 15 July 2026. The notification window for registering for the TPR is expected to open two months prior to that date.

Familiar tools, tailored application

The FCA’s proposals are firmly grounded in existing FCA consumer credit regulation, with refinements tailored to reflect the unique characteristics of this market. Among the key elements are:

Information Requirements

The FCA has decided not to apply the full CCA-style disclosure regime for DPC, in order to deliver a proportionate regulatory regime. Instead, it proposes a tailored approach requiring lenders to provide key pre-contractual information to help consumers assess suitability and risk. The FCA proposes that before a consumer enters an agreement, firms should proactively give a customer “key product information” which includes matters such as rate of interest (stating that it is 0%) and the amount of credit to be provided under the agreement alongside “additional product information” such as the identity of the lender and the consequence of missed payments. These pre-contractual disclosures are intended to support informed decision-making. Firms would also need to contact customers who miss payments or face enforcement. 

Creditworthiness

The FCA proposes to apply the existing rules on creditworthiness under the relevant part of the FCA Handbook (CONC 5.2A) to all DPC agreements regardless of amount. This means lenders must make a reasonable assessment not only of whether the customer will repay, but also of whether they can do so affordably and without a significant adverse impact on their wider financial situation. The FCA does not propose any rule changes for DPC in this area, as it considers that the flexibility within the existing framework allows firms to exercise judgement in determining what is proportionate. 

The Application of Wider Handbook

Rather than creating a bespoke DPC rulebook, the FCA will apply existing rules where appropriate, including: 

• the Principles for Business (PRIN) which sets out the fundamental obligations that FCA‑regulated firms must meet at all times. This includes the Consumer Duty;
• the Threshold Conditions when DPC lenders apply to be fully authorised. However, firms will be able to enter the TPR without being assessed against the Threshold Conditions; 
• the Senior Managers & Certification Regime (SM&CR). However, the FCA does not propose to apply any of the conduct standards for senior managers and certified staff to firms under the TPR; and
• all other relevant Handbook provisions, including the Supervision Manual (SUP) and the Enforcement Guide (EG).

Dispute resolution

From 15 July 2026, consumers will be able to bring complaints about DPC products to the Financial Ombudsman Service (FOS) under the existing DISP framework. The proposals include that the complaints-handling requirements in DISP will apply to DPC activities and that firms carrying out DPC activities will be within the compulsory jurisdiction of the FOS (once DPC agreements become regulated).  However, to ease the burden on firms in the TPR who are familiarising themselves with the new regime, the FCA proposes to suspend the complaints reporting requirements for the duration of their participation in the TPR.  

Data reporting and FCA Oversight 

As the FCA does not currently regulate the sector, it does not routinely receive data from firms about their DPC activity. To support supervision, the FCA intends to introduce a new data reporting return for DPC firms and the FCA assumes DPC firms will incur IT development costs to comply with their regulatory reporting requirements using the RegData platform. 

What’s next for firms?

CP25/23 marks a pivotal moment for DPC regulation. After years of debate and interim guidance, the FCA has laid out what it considers to be a proportionate, targeted framework reflecting consumer risks and behaviours. What began with the Woolard Review and HM Treasury consultations now lands firmly with the FCA. The question now shifts to how firms can best prepare. Firms which are entering into DPC arrangements with customers should treat this as a material regulatory shift and prepare accordingly by: 

• Reviewing the new regulatory perimeter and preparing for FCA authorisation where required. 
• Adapting disclosures to meet existing consumer credit requirements tailored to DPC’s specific features. 
• Enhancing credit worthiness assessments in line with CONC 5.2A, considering affordability comprehensively.
• Updating complaint handling processes for FOS jurisdiction. 
• Developing systems to meet new FCA data reporting obligations. 

It is also worth noting that this development is focussed on the UK. Firms operating across borders will also be aware that other jurisdictions take different approaches to regulating similar products. 

The consultation is open under 26 September 2025 and we expect significant industry engagement. As ever, we will continue to monitor developments closely and support clients navigating this evolving frontier.