Policy paper

Update: domestic premises suppliers and Buy-Now, Pay-Later (BNPL)

Published 16 June 2025

HM Treasury recently published its final position on the proposals to regulate Buy-Now, Pay-Later (BNPL) alongside laying the draft affirmative statutory instrument (The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025) for bringing BNPL products into regulation.

Under these proposals, domestic premises suppliers – businesses who sell, offer to sell or agree to sell goods or offer to supply or contract to supply services in people’s homes – would be required to seek credit broking permissions to offer BNPL products as a payment option. Historically, credit options were typically only offered on large, one-off sums repaid over several years, which sometimes led to pressure-selling.

As outlined in the consultation response, in late March, respondents from the BNPL sector notified HM Treasury that BNPL options have increasingly become available to SMEs (largely through BNPL firms’ partnerships with accounting platforms) within the last year. In light of this emerging market, the sector raised concerns that the approach to domestic premises suppliers in the proposed regulatory regime risked reducing consumer choice on small sum transactions.

Because these concerns were raised at a late stage, it was not possible to reach a final view on the regulatory approach without delaying the BNPL legislation, the regulatory regime, and the important protections it will provide to consumers. The government therefore laid legislation in line with the approach to domestic premises suppliers outlined in the BNPL consultation published in October 2024 and committed to continue to work with industry and the FCA to consider its approach to these types of merchants.

Industry engagement

Engagement with industry has demonstrated that the types of small businesses most likely to be captured within the proposals have a lower risk profile than the types of business traditionally associated with domestic premises suppliers.

In addition, there was an emerging risk that the original proposal could disproportionately impact small businesses and consumer choice – contradicting the government’s growth priorities. FCA and industry engagement suggested that many small businesses would decide not to offer BNPL  rather than spend time and money seeking credit broking permissions. This would have reduced consumer choice and could have caused some consumers to use an interest-bearing credit card or other credit – making the goods or services more expensive to access.

Outcome

Following this engagement, the government concluded that the domestic premises suppliers offering BNPL as a payment option presented a low risk to consumers and therefore the approach set out in the original draft BNPL legislation was considered as disproportionate. To address this, the government intends to lay an amending negative statutory instrument to remove the requirement for domestic premises suppliers to have credit broking permissions to offer BNPL products. Key protections for consumers will remain, these include:

• BNPL lenders will be required to perform affordability and creditworthiness checks before a consumer can use the product.
• BNPL users will be able to address poor service through section 75 of the Consumer Credit Act and raise complaints through the Financial Ombudsman Service.
• When authorised by the FCA, BNPL lenders will be expected to comply with the FCA’s Consumer Duty rules, which state that firms should regularly monitor and review consumer outcomes. Under Consumer Duty, BNPL firms will also be expected to have a greater oversight of the firms using their services – including DPS merchants.

To provide clarity to industry, this legislation is expected to be in place to coincide with the regulation of BNPL.

The government and the FCA will continue to closely monitor this market and will take action if they identify any evidence of emerging consumer harm in this space.