An overview of Buy Now, Pay Later regulation in the UK, EU, USA, Australia & Singapore

The exponential growth of the e-commerce sector in recent years has fueled demand for easily accessible consumer credit. One of the fastest-growing trends in the online payment sphere has been that of Buy Now, Pay Later (BNPL) schemes. By 2027, BNPL users are expected to grow to 900 million, from 360 million in 2024 .

BNPL has gained traction because of its consumer appeal, with readily available, interest-free credit helping shoppers during a time of rising living costs and lower disposable incomes.

However, these credit schemes have recently come under media and broader public scrutiny, as stories emerge surrounding high fees for late payments, complex refund processes, and even poor credit scores as a result of using the payment method.

As a result of growing public opinion on the subject, governments worldwide are beginning to take notice and are now drawing up plans to more tightly regulate BNPL or incorporate it into current laws.

In this article, we'll look at how some of those countries are legislating BNPL, including the UK, where the government has implemented changes to current regulations.

Before we dive in and compare the different approaches, let's briefly examine how BNPL differs from other forms of credit and why it currently falls outside of the scope of most countries' current laws.

It's important to understand the differences between BNPL and other popular forms of credit, to help with context and to explain why most existing legislation doesn't cover the payment method.

Buy Now, Pay Later (BNPL) is effectively a point-of-sale loan, typically offering an interest-free period of 14 or 30 days. If customers fail to pay within that time, interest and late payment fees increase significantly. Other repayment plans for BNPL also exist, including an option to split the total purchase price into ‘slices’, which are repaid over several months, with high interest and fees quickly adding up in the event of late repayment.

BNPL providers make money by charging merchants a fixed or percentage fee for each sale, issuing the total cost of the purchase upfront and collecting repayments themselves. BNPL schemes generally require a "soft credit check" at checkout, but typically do not alter a consumer's credit rating.

Over 100 Buy Now, Pay Later providers currently operate worldwide, yet this payment method remains lightly regulated or partially exempt from local laws and regulations across many jurisdictions.

In the UK, for example, zero-fee credit agreements of under 12 months had historically fallen outside of the scope of the Financial Conduct Authority (FCA) - though this all changed as of July 2026. Despite most reputable BNPL providers sticking to codes of best practice, fears of a brewing financial scandal have prompted most major economies to begin drawing up plans to regulate the industry more tightly.

A few of the issues highlighted by various government consultations and think tanks include:

• Customers spending/borrowing more than they can afford.
• A lack of clarity in BNPL terms and conditions.
• Credit ratings suffering after late repayments.

Let's take a look at how the UK, along with the EU, USA, Australia, and Singapore, are handling the current situation.

On 20 June 2022 , the UK government laid out its official response to calls for the regulation of BNPL products following the release of the Woolard Review in 2021 , which shone a light on the potential risks to consumers from BNPL loans. Despite calls from the FCA to expedite BNPL regulation, as of October 2024, the draft legislation had only progressed to the consultation stage . Initially, this was meant to be implemented by mid-2023.

In May 2025, the UK government finally announced new rules on BNPL, with the aim of protecting consumers from unregulated borrowing.

Since then, the UK has made significant progress in transitioning BNPL into a regulated sector.

The Financial Services and Markets Act 2000 (Amendment) Order 2025 has officially brought the payment method, now legally referred to as Deferred Payment Credit (DPC), under the Financial Conduct Authority (FCA).

Lenders must now comply with the rules established in the FCA’s CP25/23 consultation, now confirmed in the FCA’s final rules PS26/1 , which mandate affordability checks and clear pre-contract information for DPC customers . Lenders must run creditworthiness and affordability assessments ( even on purchases under £50 ) and supply clear pre-contractual information.

Furthermore, BNPL adverts and promotions must comply with the FCA’s financial promotions regime. From Regulation Day, consumers gain the right to escalate complaints to the Financial Ombudsman Service, and Section 75 protection will apply to DPC agreements entered into from 15 July 2026.

Following the government’s landmark confirmation in May 2025 , the official "Regulation Day" was confirmed as 15 July 2026. This rollout coincides with a broader modernisation of the 50-year-old Consumer Credit Act. The FCA published its final rules in Policy Statement PS26/1 on 11 February 2026, with the Temporary Permissions Regime (TPR) open for registrations between 15 May and 1 July 2026, allowing existing firms to continue trading legally while their applications for full authorisation are determined.

Additionally, supplementary legislation passed in November 2025 has clarified that while lenders face strict requirements, most small merchants (such as plumbers or hairdressers) will remain exempt from full credit broking licenses to ensure interest-free credit remains accessible for everyday services.

With Regulation Day now in effect, attention turns to enforcement. Lenders that have not secured FCA authorisation or temporary permission cannot legally offer DPC agreements to UK customers, and unauthorised regulated activity is a criminal offence .

Firms admitted to the TPR aren't off the hook either: they now have six months from Regulation Day, until mid-January 2027, to submit a full application for FCA authorisation or face automatic removal from the scheme.

The wider overhaul of the Consumer Credit Act is also far from finished. Regulation Day deals with DPC specifically, but the government has signalled further phases of reform to modernise the 50-year-old regime more broadly.

On the reporting side, the FCA’s new complaints reporting format begins on 1 January 2027, with the first return covering complaints received between 1 January and 30 June 2027. Authorised DPC lenders won't file their first complaints return under the FCA's new format until July 2027 .

Laws have been in place since 2008 covering consumer credit and loans of EUR 200 to EUR 75,000. However, many BNPL loans fall under the minimum amount, so they were not governed by this existing EU legislation.

In June 2022, the EU Council decided to revise the Consumer Credit Directive, following consultations a year earlier that hinted at what was to come. Ministers across Europe were broadly in agreement over the proposed changes.

The EU Second Consumer Credit Directive (CCD II), Directive (EU) 2023/2225, was adopted on 18 October 2023 and includes BNPL providers within its scope. EU member states were required to transpose the directive into national law by 20 November 2025, with the new rules applying from 20 November 2026. The EUR 200 minimum loan amount was removed, and the exemption for interest-free credit agreements with no charges, and those requiring repayment within three months with minimal fees, has been removed.

In addition, a more limited BNPL exemption now applies only to suppliers or service providers directly offering such products to consumers. This change means firms can no longer rely on third-party BNPL providers for exemption under CCD II. To qualify for the new exemption, deferred payments must be entirely free of charge, unlike the previous allowance for small fees. Only limited late payment charges allowed by national law are permitted. The repayment period has been reduced from three months to 50 days, or 14 days for non-SME suppliers selling through online stores.

However, consumer credit is also regulated at a member-state level, so various discrepancies can still be expected across the region as a whole.

The EU legislation covers many of the same topics as that of the UK. Changes to the law would ultimately force lenders to clarify terms and conditions, ensure borrowers can afford repayments and understand what they are being sold, while revising price rules and factors affecting creditworthiness.

Buy Now, Pay Later isn't officially regulated in the USA at a federal level because, as in many other countries, short-term loans and other forms of point-of-sale credit fall outside of current regulations. The Consumer Financial Protection Bureau (CFPB) issued guidelines for BNPL schemes, outlining potential consumer risks after a December 2021 consultation.

Some state laws did cover BNPL already, with several states requiring providers to register as lenders in order to offer Buy Now, Pay Later services.

In May 2024, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that required BNPL providers to comply with certain consumer protections.

The rule, which came into effect in July 2024, clarifies that BNPL products provided through digital accounts, which are repaid in four or fewer interest-free instalments without other finance charges, fall under certain provisions of Regulation Z (Truth in Lending Act).

Following this, in September 2024, the CFPB published a compliance aid (since removed from its website) to clarify and address ambiguities in the interpretive rule after commenters expressed confusion around the definition of ‘digital user accounts’ as well as the types of loans covered.

The compliance aid explained that the rule applies specifically to BNPL products repaid in four or fewer instalments, accessed through digital user accounts, and free from interest or finance charges.

However, the CFPB withdrew this interpretive rule in May 2025 . BNPL providers are therefore no longer required under this rule to comply with the specified credit-card provisions of Regulation Z, though state-level requirements and other existing federal consumer protection laws may still apply.

Other BNPL products (e.g. those with finance charges or more instalments) may still fall under different provisions of Regulation Z, but were not subject to this specific interpretive rule. However, they may still be regulated differently. As a result, the regulatory landscape at both federal and state levels looks set to evolve further in the near future.

New York is leading the way , becoming the first state to enact a comprehensive licensing and regulatory framework for “Buy‑Now‑Pay‑Later” (BNPL) providers. New York has enacted legislation establishing a BNPL licensing framework, but detailed implementing rules from the New York Department of Financial Services (NYDFS) have not yet taken effect; as of July 2026 they remain a pre-proposed draft. The law and regulation are expected to take effect 180 days after the rule is adopted, followed by transitional arrangements for existing providers.

Up until very recently, Australia didn't regulate BNPL products, as the country's National Consumer Credit Protection Act 2009 and National Credit Code do not cover situations where a provider doesn't charge the consumer for credit or issues an upfront or fixed fee that's less than a specified amount.

At the start of June 2022, Minister for Financial Services, Stephen Jones, announced that BNPL schemes would eventually fall under the scope of the National Consumer Credit Protection Act.

In March 2024, draft legislation on BNPL was published by the Australian Government. The Treasury Laws Amendment Bill 2024: Buy Now, Pay Later (the Amendment Bill) seeks to broaden the application of the National Consumer Credit Protection Act 2009 (Cth) (the Credit Act) and the National Credit Code (the Credit Code) to encompass the regulation of Low Cost Credit Contracts (LCCCs).

As of June 10, 2025 , BNPL providers have generally needed to hold an appropriate Australian credit licence under the National Credit Act, making them subject to responsible lending obligations, though transitional arrangements allowed providers to continue operating where a licence application or variation had already been accepted by ASIC. This includes affordability checks, verification of a customer’s financial situation, and caps on late fees. They’re also required to join the Australian Financial Complaints Authority (AFCA), meaning consumers gain access to independent dispute resolution, just like with credit cards or personal loans.

Under the new rules, BNPL arrangements, applications and missed payments may appear on a consumer’s credit report and could affect their credit score, potentially influencing future access to loans, mortgages, or credit cards.

Singapore has taken action to regulate BNPL, starting in October 2022 with the announcement of the Buy Now, Pay Later (BNPL) Working Group . Formed by the Singapore FinTech Association (SFA), the Monetary Authority of Singapore (MAS), and industry players, the group launched the first phase of the BNPL Code of Conduct.

In November 2023, the BNPL Code of Conduct reached the next phase of its implementation. This is an industry-led Code of Conduct, administered by the Singapore FinTech Association under Monetary Authority of Singapore (MAS) guidance, rather than formal legislation. It stipulated that from November, existing BNPL providers would need to adhere to the code, and be accredited by the end of March 2024 . MAS has confirmed that all four BNPL providers operating in Singapore have been independently assessed and accredited under the code since May 2024.

In a similar vein to the legislation outlined in the UK, EU, and Australia, BNPL providers will have to put safeguards in place to reduce the risk of consumer over-indebtedness, including creditworthiness assessments, transparent and fair fee structures, ethical marketing standards, options for voluntary exclusion, and support for individuals facing financial hardship.

Though we've looked at some of the solutions to BNPL regulation being presented worldwide, we found very little in the way of cross-border legislation or solutions. However, some established BNPL companies, such as Klarna, have been able to enable cross-border BNPL by joining up their various domestic markets .

Legislation regarding Buy Now, Pay Later providers is definitely coming, with many countries expecting to have new or updated laws in place during 2026. Across all jurisdictions, the key changes for BNPL providers will be:

One of the core pillars of upcoming BNPL regulation is the introduction of mandatory affordability checks. Unlike traditional credit products, BNPL has operated with minimal scrutiny around a borrower’s ability to repay. New rules will require providers to assess a consumer’s financial situation before approving purchases, helping to prevent individuals from spiralling into unmanageable debt. These checks may resemble those used by other regulated lenders, such as credit card or personal loan providers, and could involve income verification or a soft credit check to determine a user’s creditworthiness.

As BNPL providers begin conducting affordability assessments and potentially sharing data with credit reference agencies, the handling of personal and financial data will fall under greater regulatory oversight. This means firms will need to adhere to stricter data protection protocols, ensuring transparency about what data is collected, how it is used, and who it is shared with. Consumers should be given more control over their information, with clear opt-ins and privacy notices becoming standard. This will help build trust in BNPL services and align them more closely with existing financial services regulation and other data privacy laws, such as GDPR.

The reforms aim to bring BNPL more in line with other regulated credit products, giving consumers access to more robust rights. For example, in the UK, once BNPL falls under the jurisdiction of the Financial Ombudsman Service (FOS), users will have the right to escalate complaints and seek independent resolution. This marks a significant shift, as BNPL users previously had limited recourse in disputes. Enhanced protections will also likely cover clearer disclosure of terms and fees, better handling of missed payments, and rules to ensure promotional messaging does not mislead or underplay the risks.+

To comply with new rules, BNPL providers and merchants will need to revise the consumer journey. Key changes will include presenting clearer terms at checkout, incorporating steps for affordability checks, and ensuring that any marketing or incentives are compliant with advertising standards. However, these changes must be implemented without introducing excessive friction, particularly for returning customers or lower-risk transactions. Striking the right balance will be crucial to maintaining conversion rates while still meeting regulatory requirements. Providers may look to embedded finance and intelligent UX design to streamline these updates.

Despite the current uncertainty, the industry is broadly supportive of recent developments.

This article was substantially reviewed and updated on 14 July 2026 to reflect recent changes to Buy Now, Pay Later regulation and implementation timelines in the UK, EU, USA, Australia and Singapore. The revisions cover UK Deferred Payment Credit rules, EU consumer credit requirements, US federal and state developments, Australian licensing and responsible lending obligations, and Singapore’s industry-led BNPL Code of Conduct.