Until now most deferred payment credit (DPC) agreements have operated under an exemption from regulation. That will change when the new regime comes into force. From regulation day (15 July 2026), lenders offering DPC will need FCA authorisation or to enter the temporary permissions regime if they wish to continue providing new agreements.

The changes go well beyond authorisation. The FCA has set expectations around how these products are designed, the information customers receive, how affordability is assessed and how missed payments are handled. Firms will also need governance and oversight that allows boards to demonstrate compliance with the Consumer Duty.

Deferred payment credit is now defined as interest-free credit used to finance goods or services, repayable in twelve or fewer instalments within twelve months. The FCA estimates the market has increased from around £60 million in 2017 to more than £13 billion in 2024, with around 20% of UK adults using DPC in the year to May 2024.

From July 2026, DPC lending and credit broking will fall within the regulatory perimeter. Firms carrying out these activities will need the appropriate permissions or must enter the temporary permissions regime to continue lending.

Merchants that broker DPC products will remain exempt from regulation in most cases, including domestic premises suppliers. This represents a change from earlier proposals that suggested these firms might be brought into scope.

The FCA believes regulation is justified given the size of the market and the potential risks to consumers. Its analysis suggests DPC users are more likely to experience financial difficulty than the wider population and may not always receive sufficient information or affordability checks under the current model.

The FCA has framed the regime around its existing objectives of consumer protection and competition. The aim is to give customers clearer information about DPC products and allow easier comparison with other forms of credit.

The Consumer Duty will be central to the new framework. Rather than introducing entirely new conduct standards, the FCA intends to rely on Duty outcomes around consumer understanding and support, with targeted rules added where needed.

The regulator also accepts the changes may reduce some levels of borrowing, particularly where stronger creditworthiness checks prevent unsustainable lending. In the FCA’s view this supports a healthier and more sustainable market.

The new rules introduce clearer requirements for the information customers must receive before entering a DPC agreement. Firms will need to provide key product information prominently before the agreement is made.

This includes the amount of credit, repayment schedule, the cash price of the goods or services and the main risks or obligations attached to the product. Firms must also say whether credit reference agency information may be used in the assessment process.

Additional information must also be provided or made available before the agreement. This includes details about cancellation rights, complaint routes to the Financial Ombudsman Service and explanations of continuous payment authorities.

Customers must also receive the agreement and related information in a durable medium once the contract is completed.

The FCA has also introduced clearer expectations for dealing with missed payments. Firms must contact customers promptly when a payment is missed and explain the amount outstanding, any fees and potential consequences.

Customers should also receive notice before an agreement is terminated, early repayment is demanded or enforcement action is taken. Communications should identify the relevant agreement, explain the sums due and outline steps the customer can take to avoid further problems.

The regulator links these expectations to existing CONC arrears provisions and Consumer Duty requirements. Firms are expected to provide information that reflects customer circumstances rather than relying on generic notices.

One of the most significant operational changes is the application of existing CONC creditworthiness rules to DPC agreements, including those below £50.

Firms will need to conduct proportionate assessments before entering each agreement. These checks must consider both the credit risk to the firm and the affordability risk to the customer.

For many providers this represents a major change, particularly where current processes involve limited affordability checks for smaller purchases. Firms will need documented creditworthiness policies and governance processes that allow boards to monitor approval rates, repeat borrowing and arrears outcomes.

Firms that do not already hold the required consumer credit permissions must apply for authorisation or enter the temporary permissions regime if they wish to continue offering DPC agreements after July 2026.

The TPR notification window opens on 15 May 2026. Firms that fail to enter the regime or obtain authorisation will not be able to enter new DPC agreements after Regulation Day. Existing agreements entered before that date remain outside the regulatory perimeter and can continue to be serviced.

PS26/1 provides the blueprint for how DPC products must operate going forward. Firms will need to review their products, customer journeys, affordability processes and governance frameworks over the coming months.

Auxillias supports lenders and consumer credit firms with regulatory implementation and governance design. We help clients interpret FCA policy, review documentation and customer journeys and build oversight frameworks that meet both the letter and spirit of the rules.

Auxillias is already working with firms in the BNPL and wider consumer credit market to help them prepare for the transition from an unregulated model into the FCA regulated regime. This includes supporting clients with regulatory interpretation, governance design, authorisation strategy and operational readiness ahead of Regulation Day.

If you would like to discuss how BNPL regulation may affect your business or how to prepare for the move from an unregulated to regulated model, the Auxillias team would be happy to help.