Buy Now, Pay Later: Why the FCA Finally Stepped In
For two decades, a short, interest-free loan offered at the checkout by firms like Klarna and Clearpay sat almost entirely outside UK financial regulation - not through an oversight, but because of a single exemption, Article 60F(2) of the Regulated Activities Order, written in 1989 for shop invoice plans and trade credit, not app-based lending.
This video traces how that exemption got reused at scale: Klarna, founded in Sweden in 2005; Clearpay, the UK arm of Australia's Afterpay, launching here in 2019; transaction value nearly quadrupling in 2020 alone as the pandemic pushed shopping online; and by 2025, Klarna alone past 11 million active UK customers, with the wider market running over £7bn a year.
It follows the FCA's own 2021 Woolard Review, which found that BNPL credit checks 'focused on credit risk, rather than affordability' - protecting the lender, not the borrower - and that a major UK bank saw 10% of 677,000 customers who had paid BNPL firms go over their overdraft in a single month. Four rounds of HM Treasury consultation followed, spread across 2021 to 2024, before the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 finally closed the exemption for third-party lenders - taking full effect on 15 July 2026, with firms given a temporary permissions window and roughly six months, to 15 January 2027, to secure full FCA authorisation.
The video sets out exactly what changed: proportionate affordability checks before lending, clear pre-contract information, and access to the Financial Ombudsman Service. And it names what did not change - BNPL offered directly by a retailer, financed with its own money rather than a third-party lender's, remains outside the new regime entirely.
Every figure is traced to a named, dated source in this video's own fact-checking, including the Woolard Review's full text, read directly from the FCA's own PDF. One claim in the original brief - an unverifiable 24% overspending statistic - could not be traced to the Review and was replaced with a verified figure from the same document.
Educational documentary. Not financial or investment advice.
In these topics
Chapters
Sources and credits
Photo credits (Wikimedia Commons)
- Palace of Westminster, seat of the UK Parliament that passed the 2025 Order bringing BNPL under FCA regulation: Celuici, CC0 - https://commons.wikimedia.org/wiki/File%3APalace_of_Westminster_from_Lambeth_Embankment%2C_July_2024_01.jpg
- Houses of Parliament and Big Ben, where the Treasury consultations and draft legislation were debated: PhilDaBirdMan, CC0 - https://commons.wikimedia.org/wiki/File%3ABig_Ben_and_the_Houses_of_Parliament_from_the_London_Eye.jpg
- 12 Endeavour Square, Stratford - the Financial Conduct Authority's headquarters, publisher of the Woolard Review: Yirba, CC0 - https://commons.wikimedia.org/wiki/File%3A12_Endeavour_Square%2C_Stratford_%282026-04-15%29.jpg
- Canary Wharf, London's financial district, backdrop for the growth of UK fintech and BNPL lending: Mitch Rosen focusmitch, CC0 - https://commons.wikimedia.org/wiki/File%3ACanary_Wharf%2C_London%2C_United_Kingdom_%28Unsplash%29.jpg
- Card payment terminal at a UK checkout, the point of sale where BNPL is offered: User:Daylon124, CC0 - https://commons.wikimedia.org/wiki/File%3AIngenico_iPP350_payment_terminal.jpg
- Lewisham Shopping Centre, a UK high-street shopping venue: Mx. Granger, CC0 - https://commons.wikimedia.org/wiki/File%3ALewisham_Shopping_Centre_1.jpg
- Shopper carrying bags after a purchase, illustrating consumer spending at checkout: rawpixel.com rawpixel, CC0 - https://commons.wikimedia.org/wiki/File%3AShopping_for_gifts_%28Unsplash%29.jpg
- UK one-pound coin, representing everyday consumer spending during the cost-of-living squeeze: Tkbwikmed, CC0 - https://commons.wikimedia.org/wiki/File%3AOnePoundCoin-P1010041.jpg
Primary sources
- FCA, 'The Woolard Review - A review of change and innovation in the unsecured credit market', published 2 February 2021, fca.org.uk Source for the exemption's history, the soft-check quote, the 677,000/10% overdraft figure, and the 2020 growth figures.
- FCA, Policy Statement PS26/1, 'Regulation of Deferred Payment Credit (unregulated Buy Now Pay Later)', 11 February 2026, following consultation CP25/23 - the final rules and their effective date.
- Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 (SI 2025/859), made July 2025, in force 15 July 2026 - via Lewis Silkin and Regulation Tomorrow client briefings.
- HM Treasury, consultation on draft legislation, 14 February 2023 (closed 11 April 2023), and further consultation 17 October 2024 (closed 29 November 2024).
- Skadden, Arps, Slate, Meagher & Flom, 'FCA Publishes New Proposals for Buy Now, Pay Later Regulation: One-Year Countdown to July 2026 Implementation', July 2025 - the merchant-direct exemption boundary.
- Klarna press release via fstech.co.uk, May 2025 - 11 million active UK customers.
- Experian plc, 'Buy Now Pay Later adoption grows as Brits embrace responsible borrowing', experianplc.com, 2026 - 2025 transaction volume and value figures.
Not regulated financial advice.