Unaffordable Lending and the July 2026 BNPL Regulations Explained

From 15 July 2026, the Financial Conduct Authority will regulate a category of interest-free credit officially called Deferred Payment Credit, commonly described as Buy Now Pay Later. The change will strengthen protection for people entering new agreements, but it will not automatically reopen or compensate older borrowing.

Separate rules already allow consumers to complain where payday loans, catalogue accounts, credit cards, guarantor loans or other regulated credit may have been provided irresponsibly.

What Is Unaffordable Lending?

Before entering a regulated credit agreement, a lender must complete a reasonable and proportionate creditworthiness assessment. This includes considering the risk that repayments could adversely affect the borrower’s financial position and whether they can repay sustainably.

There is no single checklist that every lender must follow. The checks required depend on factors such as the amount borrowed, repayment size, term, the customer’s circumstances and any history of repeat borrowing. A credit score alone may be insufficient where the available information suggests financial difficulty.

Warning signs can include repeated loans, rapid credit-limit increases, persistent reliance on borrowing for essential spending or repayments that leave too little for normal living costs. Evidence may include account statements, credit records, payslips and expenditure information.

If you experienced this with short-term credit, you can learn more about making a payday loan refund claim. Similar issues can arise with high-interest credit cards or guarantor loans gone wrong.

What Changes on 15 July 2026?

The new regime applies to Deferred Payment Credit entered into from 15 July 2026 where the lender and the retailer or service provider are different businesses. Interest-free credit provided directly by the merchant will generally remain outside this particular regime, and agreements entered into before the start date will remain unregulated under these new rules.

The FCA’s final rules require affected lenders to:

• Be authorised or hold temporary permission.

• Carry out proportionate affordability and creditworthiness checks.

• Provide clear information about the amount borrowed, repayment dates, late fees, rights and protections.

• Support customers who miss payments or experience financial difficulty.

• Allow eligible complaints to be referred to the Financial Ombudsman Service.

• Provide applicable Consumer Credit Act protections, including section 75 in qualifying cases.

The FCA says this market grew from £60 million in 2017 to more than £13 billion in 2024. Its 2024 Financial Lives Survey found that approximately 10.9 million UK adults had used these products during the preceding 12 months.

Can You Complain About Earlier Lending?

Yes, depending on the product, lender, dates and circumstances. The July BNPL regime applies prospectively, but existing consumer-credit rules may support complaints about earlier regulated lending.

Relevant concerns may include approval based on inadequate information, repeat borrowing without fresh checks, or lending that continued after clear signs of distress. Understanding how lenders should use bank statements and income checks can help you assess the available evidence.

Start by complaining directly to the lender. It normally has up to 8 weeks to issue its final response. You can usually approach the Financial Ombudsman Service without charge if the lender rejects the complaint or does not respond in time. Time limits apply, including a usual requirement to contact the Ombudsman within 6 months of the final response.

A successful complaint does not produce a fixed award. Possible outcomes include refunding interest and charges, adding compensatory interest where appropriate, adjusting an outstanding balance and correcting adverse credit-file information.

If the lender is insolvent, a claim may need to be submitted to its administrator or an available compensation arrangement. Any payment may be substantially less than the amount assessed.

Frequently Asked Questions

Does Making a Complaint Affect My Credit Score?

Submitting a complaint does not itself reduce your credit score. The underlying account and payment history may already appear on your credit file, and a successful complaint can sometimes lead to inaccurate or unfair adverse entries being amended.

Must I Use a Claims Company?

No. You can complain directly to the lender and use the Financial Ombudsman Service for free. A no win no fee claims service may offer assistance, but charges and terms should be reviewed before you agree.

Start Your Claim

Claim First is a UK claim support service assisting consumers with unaffordable-lending complaints.

Start your claim today to explore whether your borrowing and the checks completed by the lender may support a complaint.