Does The Consumer Credit Act Apply To Buy Now Pay Later?

Yes, the Consumer Credit Act 1974 can apply to buy now pay later and instalment payment models in the UK. The tricky bit is that some payment plans are exempt, some are regulated credit agreements, and some are outside the consumer credit regime altogether.

If you sell to consumers and want to let them pay later, split payments, or use a finance partner at checkout, you need to know which side of the line you're on. Getting it wrong can affect whether your agreement is enforceable, whether you or your provider need FCA authorisation, and what you can say in your marketing.

The good news is that this doesn't have to stop you offering flexible payments. You just need to set the model up carefully from the start.

Does The Consumer Credit Act Apply To Buy Now Pay Later?

It depends on how your buy now pay later arrangement is structured. The Consumer Credit Act 1974 mainly regulates credit provided to individuals, including consumers, sole traders and some small partnerships, unless an exemption applies or the rules are modified for that type of credit.

For a retailer or platform, the key question is whether you're giving the customer credit. In plain English, credit usually means the customer gets the goods or services now and pays later.

That can include:

• paying in 3 or 4 instalments after checkout
• paying nothing for 30 days
• spreading the cost over 6 or 12 months
• letting a customer buy now and settle an invoice later
• using a third-party lender or BNPL provider at checkout

Some interest-free short-term arrangements can still fall outside regulation. For example, there's an exemption often used for fixed-sum credit where the customer pays no interest or other charges, pays in no more than 12 instalments, and repays within 12 months. The detail matters, so don't assume every interest-free plan is exempt.

Since 15 July 2026, certain third-party interest-free buy now pay later and deferred payment credit agreements have been regulated by the FCA. These are often called regulated deferred payment credit agreements. Providers now need the right FCA authorisation, permission or transitional status, and FCA rules on matters like affordability checks, disclosures, complaints and consumer protection can apply.

The 2025 legislation also amended the Financial Services and Markets Act 2000 framework, the Regulated Activities Order and the Consumer Credit Act rules from that date. Importantly, some Consumer Credit Act provisions are modified or disapplied for regulated deferred payment credit agreements, so the answer isn't always as simple as applying the old consumer credit rules in full.

When Is A Payment Plan A Regulated Credit Agreement In The UK?

A payment plan is more likely to be a regulated credit agreement if you provide credit to an individual customer and no exemption applies. Once you're in regulated territory, the Consumer Credit Act, the Financial Services and Markets Act 2000 and FCA rules can all become relevant.

Here are the usual triggers to check:

• Who is the customer? Consumer credit rules are most relevant where your customer is an individual. A sole trader or a small partnership can also be treated as an individual for these purposes.
• Are you giving time to pay? If the customer receives goods or services before paying in full, that's likely to be credit.
• Are there interest, fees or charges? Interest, admin fees, account fees and some charges can make an exemption unavailable.
• How long is the repayment period? Longer repayment periods are more likely to need detailed consumer credit analysis.
• How many instalments are there? Plans with more instalments can fall outside common short-term exemptions.
• Are you lending directly or using a finance partner? Direct lending, regulated deferred payment credit and other checkout finance products are treated differently, so the structure matters.

Say you run an online furniture store. You sell a sofa for GBP 1,200 and let customers pay GBP 100 per month over 12 months, with no interest, no setup fee and no late payment charge. That may fit within a short-term interest-free exemption, depending on the exact terms. If you change it to GBP 100 per month over 18 months, or add a GBP 60 arrangement fee, you're much more likely to need consumer credit advice before going live.

Do I Need A Consumer Credit Licence In The UK?

No, not in the old sense. The old Office of Fair Trading consumer credit licence system ended in 2014. These days, you generally need FCA authorisation, FCA permission, transitional status, or a valid exemption if your activities are regulated.

This is a common source of confusion because people still search for a consumer credit licence in the UK. In practice, you should be asking whether your business or your finance provider needs FCA authorisation, and whether your own role is exempt.

Direct Lending

If your business offers regulated credit directly to customers, you may need FCA permission for consumer credit lending. This is a serious compliance step. It usually involves policies, systems, responsible lending processes, complaints handling, staff training and ongoing FCA obligations.

Using A BNPL Provider

If a third-party provider offers finance at checkout, you may not be the lender. For regulated deferred payment credit agreements, the provider will usually be the firm that needs the right FCA authorisation, permission or transitional status. The provider should also be dealing with the regulated requirements that apply to that product, including affordability checks and required customer disclosures.

For that specific regulated BNPL category, merchant activities connected with offering the BNPL product are generally excluded from credit broking regulation. In practical terms, merely presenting that regulated BNPL option at checkout or introducing the customer within the provider's approved journey won't usually mean you need credit broking permission.

However, this isn't a blanket exemption for all finance. Credit broking permissions may still be needed for other checkout finance arrangements that fall outside that BNPL merchant exclusion, such as some interest-bearing credit, longer-term finance, or arrangements where you're doing more than the standard merchant role. The right route depends on the product, the provider, your checkout flow, what your staff say, and how the customer is introduced to the finance.

Financial Promotions

Even if you don't lend money, your adverts and checkout copy can still create risk. Financial promotions for credit must be fair, clear and not misleading. You should be careful with claims like interest-free, no cost, guaranteed approval or spread the cost with no catch unless they're completely accurate and properly qualified.

Can I Offer Instalments To Customers Without FCA Authorisation?

Yes, sometimes you can offer instalments without FCA authorisation, but only if the arrangement is genuinely exempt or outside the consumer credit regime. You shouldn't rely on this without checking the details.

A lower-risk instalment model usually has features like:

• no interest
• no fees or hidden charges for using the payment plan
• a short repayment period
• a limited number of instalments
• clear written terms the customer accepts before purchase
• no pressure selling or confusing checkout journey

For example, Mia runs a UK-based boutique selling occasionwear online. She wants to let customers pay for a GBP 300 dress in 3 monthly payments of GBP 100. She doesn't charge interest, doesn't add an arrangement fee, and only offers the plan for goods sold by her store.

Mia may be able to use an exemption, but she still needs properly drafted instalment terms. Those terms should explain what the customer is buying, when each payment is due, what happens if a payment fails, whether the order can be cancelled, how returns work, and how refunds are handled under the Consumer Rights Act 2015.

If Mia later adds a GBP 25 admin fee, extends the plan to 18 months, or offers finance through a lender, the analysis changes. If she uses a third-party provider for regulated deferred payment credit, the provider's FCA position and customer journey will be important. If she offers another form of checkout finance, she may need to consider credit broking as well.

You should also keep your standard customer contract terms consistent with the payment plan. If your refund policy says one thing and your instalment terms say another, you'll create disputes that are hard to resolve cleanly.

What Documents And Compliance Steps Do I Need?

You need documents that match your actual payment model, not just a generic instalment template. A customer contract template can be a useful starting point, but it often misses the details that decide whether your arrangement is exempt, regulated or commercially risky.

Payment Terms Outline

Before you use instalment terms with customers, have a lawyer tailor them to your business. A useful outline includes:

1. Customer And Product Details: say who the customer is, what they're buying, and the total cash price.
2. Payment Schedule: list each instalment amount, due date, payment method and any upfront payment.
3. No Interest Or Charges Statement: explain whether interest, fees or charges apply, and make sure this matches the legal structure.
4. Missed Payments: set out what happens if a payment fails, including reminders, suspension of services, debt recovery steps and any lawful charges.
5. Delivery Or Access: say whether the customer receives goods or access immediately, after the first payment, or after full payment.
6. Cancellations And Returns: explain how cancellations, cooling-off rights and refunds are handled under consumer law.
7. Ownership And Risk: for goods, explain when ownership passes and who bears risk once items are delivered.
8. Data Sharing: explain what payment data you collect, who you share it with, and how this links to your privacy policy.
9. Complaints: tell customers how to raise payment disputes or complaints.
10. Regulatory Status: state whether the plan is regulated, exempt or offered through a finance partner, but only after the legal position has been checked.

Practical Compliance Checklist

You should also work through these steps before launch:

• map the customer journey from advert to checkout to payment reminders
• check whether you're lending, offering exempt credit, using regulated deferred payment credit, or using another finance product
• confirm who is responsible for FCA authorisation, affordability checks, disclosures and complaints
• review website wording, product pages, emails and social media ads
• update your consumer terms, refund policy and privacy notice
• train customer support staff on what they can and can't say about payment options
• keep records of the terms the customer accepted at checkout
• review your BNPL provider contract, especially fees, chargebacks, credit reporting, data use and complaints handling

Without clear written terms, you may struggle to recover unpaid instalments, pause access to services, or explain deductions from refunds.

What If My Customers Are Small Businesses?

Consumer credit rules can still matter when your customer is a small business. The answer depends on the customer's legal structure and the purpose of the credit.

If your customer is a limited company or LLP, the Consumer Credit Act usually won't apply in the same way because the borrower isn't an individual. You still need clear commercial payment terms, debt recovery processes and fair marketing, but you may not be dealing with a regulated consumer credit agreement.

If your customer is a sole trader, partnership of 2 or 3 people, or another unincorporated business, the rules can be different. They may be treated as an individual for consumer credit purposes.

There's also a business lending exemption that can apply where credit is over GBP 25,000 and used wholly or predominantly for business purposes. Usually, this needs careful wording and a borrower declaration. Don't assume the exemption applies just because the customer has a trading name or business email address.

For example, if you sell GBP 8,000 of salon equipment to Jasmine, a sole trader hairdresser, and let her pay over 24 months with interest, that arrangement may need consumer credit analysis. If you sell the same equipment to Jasmine Hair Ltd, the Consumer Credit Act position is likely to be different, though you'll still want strong commercial terms.

This is why your order forms should capture the customer's legal identity. A trading name isn't enough. You need to know whether you're contracting with an individual, sole trader, partnership, company or LLP.

How Do I Keep My BNPL Model Commercially Safe?

You keep your BNPL model commercially safe by checking the regulatory position first, then building your contracts, checkout flow and customer communications around that decision.

A practical process looks like this:

1. Choose The Payment Model: decide whether you'll offer your own instalments, use a BNPL provider, invoice customers later, or offer finance through a lender.
2. Identify The Customer Type: separate consumers, sole traders, partnerships, companies and platform users.
3. Check Regulation And Exemptions: assess whether the arrangement is regulated credit, exempt credit, regulated deferred payment credit, credit broking, or outside the regime.
4. Confirm FCA Position: work out whether you, your provider or both need FCA authorisation, permissions, transitional status, an appointed representative arrangement, or no permission.
5. Draft The Customer Terms: make the payment schedule, refund process and missed payment consequences clear.
6. Review Promotions: check ads, banners, FAQs, product pages and email campaigns before launch.
7. Set Up Records: store customer consents, accepted terms, payment schedules, reminder emails and complaint records.
8. Review Regularly: keep your setup current if your BNPL provider changes its product, FCA status, customer journey or merchant terms.

You should also review your contracts with finance partners carefully. Look for who handles customer complaints, who is responsible for regulatory compliance, who bears fraud and chargeback risk, how customer data is used, and what happens if the provider changes its terms.

BNPL can be a helpful growth tool. Customers like flexibility, and your business may see higher conversion rates. The aim is to offer that flexibility without creating an agreement you can't enforce or a checkout journey that attracts regulatory attention.

Key Takeaways

• The Consumer Credit Act can apply to buy now pay later, instalments and deferred payment plans where customers receive credit.
• Since 15 July 2026, certain third-party interest-free BNPL and deferred payment credit agreements have been regulated by the FCA.
• Providers of regulated deferred payment credit need the right FCA authorisation, permission or transitional status, and affordability, disclosure and consumer protection rules can apply.
• Merchant activities connected with regulated deferred payment credit are generally excluded from credit broking regulation, but other checkout finance products may still need credit broking analysis.
• Some interest-free short-term payment plans are exempt, but the details matter, including fees, repayment period and number of instalments.
• Your customer terms, checkout wording, refund process, privacy notice and finance provider contract should all line up.

If you'd like help with checking your instalment payment model, drafting customer payment terms, reviewing your BNPL provider contract or updating your checkout compliance, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.