Regulatory change · Buy Now Pay Later

BNPL regulations 2026: what lenders must do now

Stephen Wright, Sales Director · 20 March 2026 · 5 minute read
UK

Regulation day has passed. What matters now is whether a lender can prove its arrears frameworks actually work, rather than simply exist on paper.

Stephen Wright
Sales Director, arum

What you need to know

Mandatory affordability checks make BNPL visible in credit decisioning for the first time.
BNPL arrears now fall under full CONC 7 expectations, so conduct risk becomes supervisory risk.
2026 is about structural compliance. 2027 is the real stress test.

When the regulator expects firms to prove their frameworks actually work, not just exist on paper

As we close out Debt Awareness Week 2025, this is our final post in arum-Global's series reflecting on where the debt landscape stands and where it is heading. We have covered vulnerability, forbearance, and collections practice across the week and we are ending where the regulatory momentum is pointing: Buy Now, Pay Later (BNPL). Few areas deserve more scrutiny right now than this product, which has grown at extraordinary speed but largely outside traditional credit regulation.

That era is ending.

The UK Government has confirmed that third party Deferred Payment Credit (DPC) agreements will fall inside the FCA's regulatory perimeter, with final rules expected to take effect in July 2026, subject to legislative steps. Once implemented, BNPL will sit firmly under full FCA supervision.

This is not a minor technical change. It is the biggest reset in short-term consumer credit oversight for more than a decade.

And while 2026 will be the year firms implement new rules, 2027 will be the year the FCA tests whether those rules actually work.

A market that grew outside the credit framework

BNPL grew at extraordinary speed from roughly £60 million in 2017 to more than £13 billion in annual transactions by 2024. That expansion happened under a lighter-touch regime.

Research from the FCA shows that BNPL users skew younger, have lower financial resilience, and are nearly twice as likely to be in serious financial difficulty than the wider UK population. As BNPL becomes regulated credit, that risk profile moves fully into supervisory view.

What regulation will require

Once regulated, third-party BNPL lenders must:

Conduct proportionate affordability and creditworthiness checks

Provide clear pre-contract disclosures that consumers can genuinely understand

Treat customers in difficulty in line with CONC, including full CONC 7 arrears standards

Demonstrate Consumer Duty compliance through measurable outcomes

Importantly, existing agreements written before regulation day remain outside scope. This creates an operationally challenging dual-portfolio environment: regulated BNPL on one side, legacy exempt agreements on the other.

For fast-scaling providers, this will shine a spotlight on previously hidden weaknesses in data, governance, and arrears handling.

Strategic implications for banks, lenders and creditors

This isn't just a BNPL-provider story, the shift affects retail banks, embedded finance models, and any institution with exposure to short-term credit.

Affordability visibility will change credit decisioning

BNPL has historically been invisible in mainstream affordability checks. With mandatory assessments, lenders will begin seeing stacked BNPL debt, parallel instalments, and concentrated short-term obligations.

This affects:

Early-warning indicator design

Given the FCA's findings on financial resilience, this immediately alters credit-risk appetite.

Conduct risk in arrears becomes supervisory risk

BNPL arrears now fall under full CONC 7 expectations:

Avoidance of disproportionate collections activity

Even low arrears percentages on a £13bn market create meaningful operational volume. Firms with immature arrears capability will struggle.

Complaints and FOS jurisdiction will increase cost to serve

Once regulated:

Disputes over merchant returns, unclear disclosures, missing reminders, or affordability decisions become formal complaints.

That means:

A heavier operational burden

BNPL providers built for frictionless checkout, not robust back-office controls, will feel this acutely.

Capital, provisions and ECL will become more volatile

With BNPL now sitting under standard credit regulation:

ECL volatility may increase

Portfolios may "season" differently once arrears are recognised more rigorously

For banks partnering with or funding BNPL, conduct risk and credit risk now intersect more clearly than ever.

Why 2027 is the real stress test

2026 is about structural compliance.

2027 is about demonstrable outcomes.

The FCA will expect firms to prove:

MI demonstrates Consumer Duty outcomes, not activity levels

The regulator will be looking for evidence of harm reduction, not tidy documentation.

What boards should be asking now

Boards and Exec teams should already be asking:

Are BNPL journeys aligned to regulated-credit standards end-to-end?
Is affordability decisioning complete, consistent, defensible?
Do arrears and vulnerability processes meet CONC expectations?
Can current MI evidence Consumer Duty outcomes, not just compliance activity?
Do funding or partnership models introduce indirect conduct risk?
This is not just a compliance uplift it's a structural integration of BNPL into the UK's mainstream credit system.

Navigating the shift

For many firms, the challenge isn't understanding the rules it's operational translation.

Effective readiness requires:

Portfolio stress-testing ahead of the first full supervisory cycle

2026 marks the transition.

2027 determines who truly embedded the change.

As Debt Awareness Week 2026 draws to a close, the theme running through everything arum-Global has shared is consistent: regulation only delivers real consumer benefit when firms operationalise it with genuine intent.

BNPL regulation is arriving at exactly the moment consumers need greater clarity, stronger protections, and fairer treatment - and the FCA will be watching closely to ensure the industry delivers.

If BNPL is on your agenda for 2026, now is the time to shift from awareness to structured readiness, because by the time Debt Awareness Week comes around again in 2027, the industry will be expected to show real progress, not just plans.

Thank you for following arum-Global's Debt Awareness Week 2025 content. If any of these topics resonate with challenges your organisation is navigating, 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.

How we can help

The gap between structural compliance in 2026 and supervisory scrutiny in 2027 is where most of the work sits. We help firms stress-test portfolios ahead of the first full supervisory cycle, design MI that evidences outcomes rather than activity, and check that arrears handling will stand up to full CONC 7 expectations.

Questions we are asked about this

What changes for lenders in 2026?

Lenders need FCA authorisation to provide BNPL from 15 July 2026, and mandatory affordability and creditworthiness checks make BNPL visible in credit decisioning for the first time.

Why is 2027 the real stress test?

2026 is about structural compliance. 2027 brings the first full supervisory cycle, where MI has to demonstrate Consumer Duty outcomes rather than activity levels, and BNPL arrears fall under full CONC 7 expectations.

What happens to conduct risk in arrears?

It becomes supervisory risk. Disproportionate collections activity, FOS jurisdiction over complaints and a heavier cost to serve all follow, and capital, provisions and ECL are likely to become more volatile.

About the author

Stephen Wright

Sales Director, arum

Leads financial services engagements across the UK and Canada, with a track record of delivering complex solutions for major enterprises including Citibank, Lloyds Banking Group, Centrica, Chevron and Shell.