FCA Sets Out Strategic Vision for UK Consumer Credit Reform and BNPL Oversight

The UK Financial Conduct Authority (FCA) has detailed its long-term roadmap for transforming the domestic consumer credit market, stressing that future industry growth must be underpinned by consumer protection, outcome-based regulation, and technological adaptation. Speaking at the Credit Week conference, Alison Walters, Director of Consumer Finance at the FCA, outlined the regulator's priorities as the consumer credit landscape evolves beyond the five-decade-old Consumer Credit Act framework. Key focal points include the impending statutory regulation of Deferred Payment Credit—commonly known as Buy Now Pay Later (BNPL)—as well as the deployment of artificial intelligence, open finance integration, and data-centric supervisory models. A central component of the FCA's agenda is the integration of BNPL products into the official regulatory regime. Under the upcoming framework, providers of deferred payment credit will be required to conduct formal affordability assessments, ensure transparent communication to prevent unsustainable debt accumulation, and provide dedicated support, including debt advice signposting, for borrowers in financial difficulty. Alongside BNPL integration, the FCA is progressing broader reforms following the introduction of the Financial Services and Markets legislative changes. The regulator is reviewing existing disclosure standards, including whether current Representative APR requirements effectively aid consumer understanding, while preparing to consult on core sections of the historic consumer credit regime. On the technological front, the FCA is applying an outcomes-focused framework to artificial intelligence under the Consumer Duty and the Senior Managers and Certification Regime (SM&CR). Rather than establishing prescriptive AI-specific rules, the watchdog is assessing whether automated tools and predictive models act in consumers' best interests. Through its AI Lab and a sandbox partnership with Nvidia, the regulator is providing fintechs and lenders with advanced computing infrastructure to safely test emerging tools, with formal examples of good and poor AI practices scheduled for publication later this year. The FCA is also shifting toward more targeted, data-led supervision to identify market risks before harm crystallises. This includes new regulatory reporting requirements, such as the CCR009 return for ancillary credit firms, and the Retail Banking Business Models (R2B2) data collection rules, which mandate annual reporting across mortgages, personal banking, and small-business lending. Regarding high-cost short-term credit (HCSTC), the regulator reported that stakeholder roundtables showed broad support for retaining the existing price cap to maintain market stability and consumer safeguards, with current evidence supporting no immediate change. To address misconduct across specific lending verticals, the FCA highlighted inter-agency coordination through a joint taskforce with the Solicitors Regulation Authority (SRA), the Information Commissioner’s Office (ICO), and the Advertising Standards Authority (ASA), aimed at clamping down on improper motor finance claims handling by claims management companies and law firms.