Buy Now Pay Later is one of the most used payment methods across the globe. It’s flexible, doesn’t carry the baggage of owning a credit card, and doesn’t give consumers a blow to the gut when they see their bank statement.
For years, BNPL operated as a wild west with minimal oversight, few protections, and providers setting their own rules. But that’s all changed. Regulators in the US, UK, and EU now stepped in to protect shoppers from debt traps while creating clear standards of consumer protection.
If you run an online business and rely on BNPL to drive conversions, these changes affect you directly. Here’s what you need to know about the new regulatory landscape and how to adapt your payment strategy.
SECURELY OFFER BNPL AT CHECKOUT
Regulation for BNPL Solutions in the US, EU, and UK
Below is a comprehensive rundown of the rules that surround how both businesses and consumers can use Buy Now Pay Later solutions.
US Regulators Treat BNPL Like Credit
The Consumer Financial Protection Bureau decided that BNPL firms offering products through digital accounts qualify as credit card issuers under the Truth in Lending Act. The rule requires firms to provide customers with the same protections they’d get using a traditional credit card.
BNPL providers now have to process refunds for returned goods, investigate merchant disputes and pause payments during those investigations, and deliver clear billing statements that disclose all fees.
The CFPB made this move after seeing the market explode. BNPL usage increased tenfold between 2019 and 2021. Director Rohit Chopra expressed concern that some consumers receive more credit than they can realistically manage.
UK Brings BNPL Under FCA Authority
On 19 May 2025, the Economic Secretary to the treasury introduced legislation that brings deferred payment credit under the financial conduct authority FCA’s supervision starting July 15, 2026. This regulatory regime requires firms to either obtain full authorization or operate under a temporary permissions regime while their applications move through review.
The temporary permission framework lets existing providers continue operations, but they need to notify the financial ombudsman two months before Regulation Day and comply with all FCA rules.
The FCA says these rules will protect shoppers by requiring affordability checks before approving any BNPL loan. Lenders will need to verify that consumers can actually repay what they borrow (a basic protection that didn’t exist before).
Consumer duty is at the center of the UK’s approach. The principle requires firms to assess whether their products and services deliver good customer outcomes throughout the entire lifecycle. Lenders need frameworks for collecting data and testing actual customer experiences to prove their BNPL products provide fair value and prevent foreseeable harm.
The FCA deliberately avoided creating entirely new regulations. Instead, they aim to extend existing frameworks like the Consumer Duty and Consumer Credit Sourcebook to cover BNPL. Both protect consumers while supporting innovation and growth in the sector.
EU Closes the Regulatory Gap
The European Union expanded its Consumer Credit Directive to explicitly include BNPL products, loans up to €200, interest-free loans and short-term credit. Member states need to implement these protections by the end of 2025, with full enforcement rolling out through 2026.
- The directive introduces:
- APR caps
- mandatory risk assessments
- affordability checks
- stricter requirements for consumer information disclosure
These measures close a regulatory gap that previously created major risks in e-commerce transactions. The goal centers on preventing excessive debt accumulation while fostering transparency and accountability across the BNPL industry.
What Business Owners Need to Know
Merchants should expect BNPL costs to climb as providers absorb compliance expenses.
Pay-in-4 products typically run 4-6% per transaction, while longer-term installment options cost 6-1—sometimes hitting 12% for high-risk categories. Standard credit card processing fees sit around 2.5-3%, making BNPL significantly more expensive even before factoring in new regulatory costs.
Approval rates may drop as providers implement stricter affordability checks and risk assessments. If you notice customers getting declined more frequently, tightening regulations are likely cutting into your conversion rates.
Onboarding timelines have also lengthened. Providers now conduct more rigorous underwriting that extends approval from days to weeks.
BNPL providers increasingly exclude certain industries or impose stricter underwriting standards on categories like supplements, adult content, and digital products. Your refund and dispute processes are more important than ever under these new rules since delays can result in losing BNPL access entirely.
In the UK, the financial ombudsman now accepts complaints from BNPL users, and each complaint that progresses generates a £650 case fee for the provider. This creates financial pressure on providers that flows downstream to merchants through higher fees and tighter eligibility requirements.
White Label Installment Plans Are Better
White label installment plans offer an alternative that gives you control while delivering the same customer benefits as traditional BNPL. These solutions let you maintain your brand throughout the entire payment experience instead of handing customers off to a third-party provider.
You negotiate rates directly based on your specific business profile rather than accepting standardized BNPL pricing. White label providers often show more flexibility with high-risk categories, understanding that different industries carry varying risk profiles that shouldn’t automatically disqualify them from offering installments.
Customers get flexible repayment terms: weekly, bi-weekly, or monthly options that match their financial situation. The approval process happens instantly, so customers complete purchases without delays. Most white label solutions offer interest-free payments with no hidden fees, just like standard BNPL consumer terms.
The biggest advantage centers on ownership of the customer relationship. Traditional BNPL providers control customer data and communications, but white label solutions keep everything under your brand. You build loyalty, manage the complete customer experience, and collect valuable data about payment preferences.