What the new FCA BNPL rules mean for retailers

What has changed?

The FCA’s new regulations require BNPL providers to:

• Give clear, upfront information, including payment amounts, due dates, and what happens if a payment is missed.
• Run proportionate affordability checks on every purchase, not just when a customer first opens an account. This includes purchases under £50.
• Notify customers immediately if they miss a payment, explain what they owe and the consequences, and signpost free debt help where a customer is struggling.
• Apply Section 75 protection, making the BNPL provider jointly liable with the retailer for purchases over £100 and up to £30,000, in line with credit cards. This only applies to agreements made from 15 July 2026 onwards.
• Give customers access to the Financial Ombudsman Service (FOS) if they need to escalate a complaint. Liability for an upheld complaint sits with the provider, not the retailer, since the provider is the credit intermediary in the transaction.

Affordability checks will not look identical across every platform. The FCA has issued guidance, but lenders retain some discretion in how they apply it, so process and friction at checkout may vary depending on which provider you use.

Who is in scope?

The rules target the platforms extending credit, primarily Klarna, Clearpay, and PayPal, along with smaller providers offering deferred payment credit.

Retailers using a third party that already handles compliance on their behalf, such as the Newday model behind certain store-branded credit, sit largely outside the direct regulatory burden.

However, those offering BNPL or a deferred payment option directly, rather than routing it through an authorised provider, are pulled into scope. So, if you think this may apply to your business, it is worth checking.

Why has the FCA stepped in?

Since its rise in popularity in 2019-2021, BNPL has sat outside mainstream credit files. This has permitted customers to hold several plans across different providers, with no single lender able to see the full picture of what they owe. Referred to as loan stacking, this hides total debt from the very check designed to prevent it.

The risk is currently concentrated amongst younger borrows. Around 60% of 18- to 28-year-old BNPL users hold between two and five plans at once. Alongside this, enquiries for help with BNPL debt have risen 58% year on year, with the average amount owed standing at £711. This shows the real risks of loan stacking, which has been able to grow under unregulated BNPL.

How will this impact retail businesses?

The new FCA regulations won’t require retailers to implement any compliance measures themselves, but they may feel the indirect impact with a reduction in sales and return rates, and fee increases from BNPL providers. These impacts could include the following:

• Checkout friction may reduce conversion: More affordability checks mean more steps at checkout. If a meaningful share of your revenue depends on BNPL, stress test what happens if some of those customers drop out rather than complete the check.
• Sub-£50 checks touch everyday purchases: With affordability checks including items under £50, this is more than just a large-basket issue. If your average order value sits in this range, the new checks apply to a much larger share of your transactions than you might expect.
• Returns may fall further: Return rates are already trending down. Less BNPL volume removes one of the known drivers of high-return behaviour, which compounds that trend rather than offsetting it.
• Costs may be passed on: Providers facing higher compliance costs may pass some of that cost to retailers, or BNPL may stop being free for consumers at the point of sale.
• Liability sits with the provider, not you: Where a customer escalates a complaint through the FOS, the provider carries that liability as the credit intermediary. This is a genuine reduction in retailer risk compared with offering credit directly.

What retailers should do now

1. Confirm whether you are in scope

Check whether your business uses BNPL platforms, and if any part of your payment offering counts as a direct credit agreement rather than a routed third-party product.

2. Review your checkout journey

Review your checkout journey and stress test the revenue impact of added friction at the BNPL step.

3. Revisit how BNPL sits alongside your brand

Look at BNPL compatibility with your brand, especially if the regulations will change how customers perceive products at checkout.

4. Model exposure

Model exposure not just at the headline BNPL, but at the sub-£50 level too, as this is where affordability checks bite hardest and most frequently.

“BNPL has grown quickly, but many businesses still see it as a simple payment option rather than a regulated credit product and that assumption is now much riskier. Some businesses will need to look carefully at whether their arrangements bring them into scope, particularly where they offer payment plans directly.”

-Adam Norman, Retail Partner