Deferred Payment Credit regulation: How lenders can prepare

DPC refers to short-term, interest-free credit arrangements that enable consumers to pay for goods or services in up to 12 instalments within 12 months. Under the FCA's proposed framework, from 15 July 2026 (referred to as “Regulation Day”), third-party lenders offering DPC will come under FCA oversight.

Building on our previous article on Buy-Now, Pay-Later regulation, we explore the core elements of the FCA’s proposed regulatory framework for DPC and outline practical steps firms should take to prepare.

What are the FCA’s key proposals for the Deferred Payment Credit regulation?

The FCA’s consultation outlines several key proposals designed to strengthen consumer protections and promote responsible lending in the DPC market:

• Mandatory creditworthiness assessments: Lenders will be required to conduct proportionate but well-documented creditworthiness assessments. These must be adequately evidenced and monitored, with particular attention to:
  • How automated systems are delivering appropriate affordability outcomes, not just at initial development, but consistently across future cases.
  • The extent of reliance on Credit Reference Agency (CRA) data and the justification for using it to assess affordability.
• Enhanced disclosure requirements: To ensure consumers understand the product's terms, costs, and risks, firms must provide clear, prescribed Key Product Information. This includes information on the rate of interest, amount of credit, number and frequency of payments, etc. These disclosures must enable consumers to make timely, informed decisions in line with the Consumer Duty.
• Application of consumer credit rules and the Consumer Duty: The FCA has clarified which elements of the consumer credit regime will apply to firms offering Deferred Payment Credit, alongside how the Consumer Duty will be integrated. This distinction ensures that DPC lenders understand their obligations and are equipped to deliver fair outcomes while complying with tailored regulatory requirements.
• Access to the Financial Ombudsman Service for resolving disputes.

To support innovation while maintaining safeguards, the FCA will introduce a Temporary Permissions Regime (TPR) to allow firms to continue operating while seeking authorisation. DPC lenders will also be expected to submit regular data reports on customer outcomes and product performance.

The consultation is open until 26 September 2025, with final rules anticipated in early 2026.

How can lenders prepare for the upcoming regulation of Deferred Payment Credit?

With the effective date fast approaching, lenders currently offering Deferred Payment Credit should begin preparations to ensure readiness. Below, we share insights from past regulatory transitions, including the recent implementation of the Consumer Duty, which may help guide firms in designing and implementing the necessary changes to meet the FCA’s proposed requirements.

• Governance and programme management: Firms should implement a robust governance framework and programme management system to ensure progress is tracked at appropriate levels. When issues arise, a clear escalation process must be in place for swift resolution. This area is frequently underdeveloped in the early stages, often resulting in delays.
• Implementation plan and prioritisation: A detailed implementation plan with defined milestones is essential for monitoring progress. From our experience, practices in this area vary considerably. Even at the consultation stage, firms should prioritise elements unlikely to change, conduct gap analyses, and focus resources accordingly. The plan should also specify a firm date for submitting the authorisation application along with the necessary information and securing TPR status.
• Communication strategy: Developing a comprehensive communication strategy is vital. Internally, firms should keep senior stakeholders informed of progress, communicate process and control changes to staff, outline impacts on IT infrastructure, and coordinate training schedules to support successful embedding. Externally, firms should anticipate and clearly convey any implications for clients.
• Training: A targeted training programme is essential to ensure staff at all levels can confidently understand and apply new regulatory requirements and operational processes. For firms newly entering the scope of FCA regulation, this becomes particularly critical. In these cases, bespoke training for the board and senior management on the Senior Managers and Certification Regime (SMCR) is strongly recommended. This equips leadership with a clear grasp of their individual accountability, regulatory responsibilities, and governance expectations under the regime. Establishing this foundational knowledge early helps foster a culture of compliance and sets the tone for effective implementation across the firm
• 2nd and 3rd line reviews: Engaging the second and third lines of defence is critical to ensure that regulatory requirements are properly implemented, and the implementation programme is being governed, monitored, and executed with efficiency. These teams should also assess whether the design and implementation of changes have been carried out appropriately.

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