A landmark moment for UK consumer credit
On 16 July 2026, Buy Now Pay Later formally entered the FCA's regulatory perimeter. Third-party Deferred Payment Credit (DPC) agreements are now regulated credit, and the millions of people who use BNPL every week gain the protections they would reasonably expect from any other borrowing: proportionate affordability checks before credit is offered, clearer information at the point of purchase, access to the Financial Ombudsman Service when things go wrong, Section 75 protection on qualifying purchases, and a requirement that customers in difficulty are supported and signposted to debt advice rather than passed straight to a collector.
Back in March, we wrote that 2026 would be the year of implementation and 2027 the year the FCA tests whether implementation actually worked. That clock is now ticking. And while much of the commentary will focus on the checkout experience, the more consequential story for our industry sits further downstream: in arrears, collections, and recoveries.
At Arum, we see this not as a compliance burden having landed, but as a genuine opportunity. Firms that get the next 18 months right will emerge with stronger data, better customer relationships, and collections operations fit for the next decade of consumer credit.
Why this matters for consumers
The scale of what has just moved into regulation is remarkable. BNPL grew from roughly £60 million in transactions in 2017 to more than £13 billion by 2024, and an estimated 11 million UK adults now use these products. Fresh analysis from PayPlan shows BNPL usage among its debt advice customers rose by 3,793% between 2020 and 2025, with the average number of BNPL accounts per user climbing from 1.25 to 1.91 over the same period.
Two findings from recent research deserve particular attention from anyone designing collections journeys:
First, BNPL is no longer just discretionary spending. YouGov polling for StepChange suggests around 2.2 million UK adults used BNPL to pay for essentials in the last three months. When a product shifts from funding trainers and gadgets to funding groceries and school uniforms, the profile of customers who fall into arrears shifts with it. Expect more vulnerability, more multi-debt situations, and more need for genuinely tailored forbearance.
Second, awareness of the change is strikingly low. PayPlan found around 85% of consumers were unaware regulation was coming, yet 100% supported it once informed. That awareness gap is an opportunity for firms: the lenders who communicate these new rights clearly and proactively will build trust that their competitors leave on the table.
The FCA has been clear that the goal is not to restrict access to credit but to make sure it works for people rather than against them. That framing matters. This is a regulator seeking a healthy, sustainable BNPL market, and firms should approach the regime in the same constructive spirit.
The regulatory web BNPL now sits within
BNPL regulation does not arrive in isolation. It plugs directly into an established framework, and understanding those connections is essential for anyone scoping systems and process change:
Consumer Duty. The FCA has deliberately built the BNPL regime on existing consumer credit rules rather than inventing a new rulebook. That means the Duty's outcomes-based expectations apply from day one, and firms will need MI that evidences good customer outcomes, not just completed activities.
CONC, and CONC 7 in particular. BNPL arrears now fall under the full arrears, default and recovery standards: timely and clear communications, proportionate forbearance, effective vulnerability identification, and no disproportionate collections activity. Even modest arrears rates on a market this size translate into significant operational volume.
The Financial Ombudsman Service. Disputes over refunds, unclear disclosures, missed-payment handling, and affordability decisions can now escalate to FOS. Complaints capability, root-cause analysis, and case management tooling all move up the priority list.
Section 75 of the Consumer Credit Act. Joint liability on qualifying purchases over £100 gives consumers real recourse, and gives lenders a new category of claims to process, adjudicate, and learn from.
Consumer Credit Act modernisation. The Government confirmed in May that the CCA will be modernised for the first time in over 50 years. Firms building BNPL compliance now should design for a regulatory landscape that will keep evolving, not a fixed target.
There is also a structural wrinkle worth naming plainly: agreements written before 16 July remain outside the new regime. Most lenders will therefore run a dual portfolio for some time, with regulated and legacy agreements sitting side by side, sometimes for the same customer. Collections systems, strategies, and agent guidance all need to handle that distinction cleanly. It is exactly the kind of operational complexity that looks manageable on a slide and causes real pain in a live environment.
Lessons from abroad: the themes are converging
The UK is not the first market to take this step, and one of the advantages of moving second (or third) is the chance to learn from those who moved first. Looking across markets, three themes stand out.
The direction of travel is universal: BNPL is credit. Australia brought BNPL under its National Consumer Credit Protection Act in June 2025, requiring providers to hold credit licences and join the financial complaints authority. The EU's second Consumer Credit Directive removes the exemption for short-term, interest-free instalment products, with firms required to comply from November 2026. Sweden requires full licensing. France transposed early with stronger affordability and disclosure requirements. Wherever BNPL has scaled, regulators have reached the same conclusion. For UK firms operating internationally, this convergence is good news: capability built for the FCA regime travels well, and the UK-EU regulatory gap is narrowing rather than widening.
Hardship and arrears capability is where regimes bite. Australia's approach is instructive: even agreements written before its rules commenced still carry hardship and complaints rights. Regulators everywhere are signalling that how firms treat customers in difficulty is the true test of the regime, not the paperwork at origination. Firms with immature arrears operations feel this quickly.
BNPL has become everyday financial infrastructure. In the US, over half of Gen Z and millennial users now reach for BNPL more often than credit cards, and the share of households using it for groceries has doubled. Mainstream banks are embedding instalment features directly into cards and wallets. The product is not a fad at the checkout; it is a permanent feature of how younger consumers manage money. Collections functions across every lending sector will increasingly encounter BNPL commitments in their customers' affordability pictures, whether they offer the product or not.
That last point is worth dwelling on. As BNPL data flows into credit files and affordability assessments, every lender gains a clearer view of their customers' true short-term obligations. That is a material upgrade to credit risk decisioning, early-warning indicators, and pre-arrears strategies across the whole market. Treated properly, it is one of the biggest data dividends UK consumer credit has seen in years.
The next 18 months: from regulation day to supervisory scrutiny
For collections and recoveries leaders, we would frame the journey from here to the end of 2027 in three phases.
Now to early 2027: stabilise and evidence. Firms operating under the temporary permissions regime have six months from 16 July to apply for full authorisation, and the FCA will expect the fundamentals to be demonstrably in place: CONC-compliant arrears journeys, vulnerability identification that works in practice, complaints handling ready for FOS volumes, and clean handling of the dual regulated/legacy portfolio. This is also the window to fix data foundations, because everything the regulator will ask for in 2027 depends on data captured correctly in 2026.
Through 2027: prove outcomes. The first full supervisory cycle will test whether affordability checks were effective rather than procedural, whether forbearance genuinely helped customers, and whether complaints root causes are understood and reducing. MI that shows activity levels will not be enough; firms need MI that shows outcomes.
Throughout: build for what comes next. CCA modernisation, CCD2 for firms with EU exposure, and the FCA's ongoing market monitoring all mean the regulatory environment will keep moving. System and process decisions made now should assume change as a constant. Configurability, strong data architecture, and clear ownership of regulatory horizon-scanning are worth more than any point-in-time compliance fix.
Questions worth asking of your own operation right now:
- Can our collections platform distinguish and correctly treat regulated DPC agreements and legacy exempt agreements, including for the same customer?
- Do our arrears journeys meet CONC 7 standards end to end, and can we evidence it?
- Is our vulnerability framework effective in practice, and how would we demonstrate that to a supervisor?
- Are we ready for FOS-eligible complaints in terms of volume, tooling, and root-cause analysis?
- Does our MI evidence customer outcomes, or just operational activity?
- Are we using newly visible BNPL data to improve affordability, segmentation, and early-warning capability across the wider book?
If any of those produce an uncomfortable pause, the good news is that there is still time to act, but the window is the next 18 months, not the next five years.
The opportunity in front of us
It is easy to read regulation as cost. We would encourage a different reading. The firms that treated Consumer Duty as an operating philosophy rather than a compliance exercise are now reaping the benefits in customer trust, complaint volumes, and regulatory relationships. BNPL regulation offers the same choice.
Done well, the next 18 months deliver: richer affordability data across the market, earlier and more effective support for customers in difficulty, collections operations that are more automated, more compliant, and more humane, and a BNPL sector that consumers can use with confidence. That is good for customers, good for the industry, and good for the firms that move early and move well.
How we can help
Arum has spent over 25 years helping banks, lenders, utilities, and government bodies get collections and recoveries right, across the UK and internationally. We have supported firms through every major regulatory shift in that time, and BNPL is no different.
Whether you need an independent gap assessment against the new regime, help defining requirements for a collections platform that can handle regulated and legacy portfolios side by side, support implementing or upgrading systems ahead of the 2027 supervisory cycle, or analytics that turn newly visible BNPL data into better customer outcomes, we can help. Our global reach means we bring lessons from Australia, Europe, and North America to bear on UK challenges, and our independence means our advice is shaped only by what works.
If BNPL readiness is on your agenda, we would welcome the conversation.
Arum-Global helps banks, lenders, and creditors navigate regulatory change, strengthen collections operations, and build compliance frameworks that deliver measurable consumer outcomes. Get in touch to discuss how we can support your BNPL readiness journey.
Organisations don’t need to navigate this alone. Many benefit from an independent view of their current collections environment, from call listening and skills analysis to identifying gaps, strengthening processes and supporting training delivery.
With the right expertise behind them, teams can embed these behaviours quickly and confidently, creating lasting change for customers and the organisation.
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About the author
Stephen is Sales Director at Arum Global, leading financial services engagements across the UK and Canada. He brings extensive experience delivering complex solutions to major enterprises, having previously worked with clients such as Citi Bank, Lloyds Banking Group, Centrica, Chevron & Shell amongst other complex enterprise clients. Stephen combines deep industry knowledge with a consultative approach to drive transformation and measurable results.
Stephen Wright
Sales Director