Research and analysis

The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025: impact assessments - RPC opinion (green-rated)

Regulatory Policy Committee opinion of HM Treasury’s impact assessments (IA) in respect of the order

• From: Regulatory Policy Committee
• Published: 20 May 2025

Documents

RPC Opinion: The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025

PDF, 218 KB, 11 pages

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Details

Buy-Now, Pay-Later (BNPL) is a type of interest-free instalment credit that allows borrowers to divide the cost of purchases into regular payments over a period not exceeding 12 months.  BNPL agreements currently fall under an exemption from consumer credit regulation.  This exemption applies to credit agreements meeting specific criteria, including having no more than 12 payments within 12 months and being interest-free, and was designed to avoid regulating low-risk credit arrangements, particularly those offered by SMEs not primarily engaged in financial services.  BNPL agreements are usually for small amounts (£100 or less) and short durations and are typically taken out with third-party lenders during online shopping transactions.

The Order will bring BNPL agreements into regulation under the Financial Services and Markets Act 2000, and aims to address lending practices that could, potentially, harm consumers.  Under the Order, lenders offering BNPL will need to be authorised by the Financial Conduct Authority (FCA). Consumers will, additionally, have access to a wider range of protections, including use of the Financial Ombudsman Service for redress. The regulatory regime introduced by the Order, and subsequent FCA rules, will require firms offering BNPL products to perform affordability checks on borrowers and offer clear product information to consumers to prevent unaffordable borrowing and help them make informed decisions.

The IA estimates an equivalent annual net direct cost to business of £2.3 million. The IA notes that the FCA will consult on rules for newly-regulated agreements and conduct further cost-benefit analysis.  The assessment provides sufficient justification for not exempting SME lenders and provides adequate justification for exempting merchants that broker BNPL products

Published 20 May 2025