BNPL regulation is here. Arrears is where it bites

From 15 July 2026, third-party Buy Now Pay Later lending, known in the rules as Deferred Payment Credit (DPC), is regulated consumer credit under FCA supervision. For a sector that has grown from £0.06 billion in 2017 to over £13 billion in 2024, with one in five UK adults using it, this is the biggest structural change since the products launched.

Most of the coverage has focused on affordability checks and disclosure at the point of sale. That's understandable. It's the visible end of the customer journey.

But the sharpest operational risk sits somewhere less visible: what happens after a customer misses a payment.

What changes on Regulation Day

The FCA published its final rules in Policy Statement PS26/1 in February 2026. From Regulation Day:

DPC lenders need FCA authorisation or a place in the Temporary Permissions Regime (TPR) to keep lending. Firms in the TPR must comply with most FCA rules from day one, not from the date they're fully authorised.

Consumer Duty applies. Every DPC lender is now accountable for delivering good outcomes across the whole customer journey, including customers in financial difficulty.

The Financial Ombudsman Service opens up. Customers can escalate complaints about regulated DPC agreements entered into on or after 15 July 2026.

And a new section of the Consumer Credit Sourcebook, CONC 7.20, governs how DPC lenders must handle missed payments.

CONC 7.20: four requirements, one operational test

The new arrears framework asks four things of DPC lenders:

1. Prompt contact. When a customer misses a payment, the lender must reach them quickly, not let the account drift.
2. Clear consequences. Customers must understand what a missed payment means for them, in plain terms.
3. Reasonable notice before enforcement. No jumping straight to enforcement action without warning the customer first.
4. Signposting to free debt advice. Customers in difficulty must be pointed towards free, impartial help.

Read as a list, none of this sounds demanding. Read as an operational requirement across hundreds of thousands of low-value, high-volume accounts, it's a different proposition. Every one of those four steps has to happen consistently, at the right time, in the right sequence, and be evidenced. If the FCA or the Ombudsman asks how a specific customer in arrears was treated last October, "we're confident our process is sound" is not an answer. A complete record is.

Why arrears is the exposed flank

BNPL lenders are some of the best origination businesses in UK credit. Checkout journeys are fast, decisioning is instant, and the customer experience up to the first repayment is genuinely strong.

Arrears operations grew up differently. Outside the regulatory perimeter, missed payments were a commercial problem to be managed, not a regulated activity to be evidenced. Processes were often manual, spread across tools, or handled by a payments provider's standard retry logic. That was rational at the time. Some firms went well beyond what the law required, with voluntary checks and support for customers in difficulty. But voluntary good practice built for its own sake rarely produces the evidence trail a supervisor expects, because until now, nobody could ask for it.

The new regime changes the equation for everyone, careful and careless alike. Consumer Duty expects lenders to identify customers in difficulty, treat them appropriately, and prove it. CONC 7.20 turns arrears handling into a rules-based activity with an audit trail attached. And FOS access means individual arrears journeys can now be examined, one complaint at a time.

The lenders that treated regulation as a checkout and disclosure project will feel this first. The ones that treated it as a whole-lifecycle project won't.

What good looks like now

Meeting CONC 7.20 at BNPL volumes needs three things working together.

Automated workflows that trigger the right contact at the right moment, so prompt contact happens on every account, not just the ones an agent gets to. A self-service route that lets customers see their position, set up a plan, and resolve their arrears at 11pm on their phone, which is how most of them would rather do it. And a system of record underneath both: a single authoritative source of balances, payment history, communications, and the audit trail that regulators and the Ombudsman will ask for.

That last point matters most. An engagement tool bolted onto a payments stack can send messages. It can't evidence a customer's whole journey. Under the new regime, the evidence is the product.

Flexys builds collections software that does exactly this for lenders: configurable workflows, a fully integrated customer portal, and a cloud-native system of record built for UK collections practice and Consumer Duty from the ground up. For BNPL lenders now inside the perimeter, it's the difference between hoping your arrears process holds up and knowing it will.

‍

See how Flexys helps lenders reduce regulatory risk in collections. Speak to a collections expert or read our guide to Consumer Duty in collections.

‍