Late fees used to be part of the model
For years, missed payments were a routine part of BNPL. A 2024 Finder survey found that 53% of BNPL users had been charged a late fee in the previous 12 months, at an average of £23.50 each.
That model doesn't sit comfortably with the new regime. Since 15 July 2026, BNPL lenders have been regulated by the FCA and subject to the Consumer Duty. They are expected to identify customers in financial difficulty, offer appropriate support and forbearance, and signpost free debt advice. Customers who feel they've been treated unfairly can now go to the Financial Ombudsman Service.
Not every missed payment is about whether the customer can afford to pay. Some come down to timing or to the payment method itself, and those are problems payments can fix.
Why BNPL repayments fail
Many BNPL repayments are collected from a debit card saved at checkout. When a repayment fails, the cause is often one of these.
The card may be linked to an account that's empty on the due date, while the customer's money is in another account. The due date may fall a day or two before payday. The card may have expired, been lost or been replaced, so the stored details no longer work. Or the customer may be genuinely struggling, often with several commitments at once.
The first three are operational. The fourth needs a different response altogether. A good arrears process tells them apart quickly and treats each one appropriately.
What the rules now expect
The FCA's rules for deferred payment credit bring BNPL into the same broad framework as other consumer credit. In practice, lenders should be able to show that they give clear information upfront about what happens if a payment is missed, spot signs that a customer may be in financial difficulty, offer forbearance where appropriate, such as more time or a revised plan, signpost free, independent debt advice, and treat customers fairly throughout, in line with the Consumer Duty.
Aggressive retry strategies and stacked fees are hard to reconcile with those expectations.
Payment fixes for timing problems
When the problem is timing or the wrong account, the fix is to give the customer a quick, easy way to pay from the right place.
With pay by bank, the customer receives a payment request by email, SMS or in the app, chooses whichever of their bank accounts has the money, and approves the payment in their banking app. There are no card details to update. If the customer can pay part of the instalment now, the lender can request that amount and agree the rest. Where the issue is payday, the lender can agree a new date and send the request then.
Pay by bank payments settle over Faster Payments in seconds, so reminders stop as soon as the customer has paid. That avoids the frustrating experience of being chased for money that's already been sent.
Data fixes for early warning
With the customer's consent, open banking account information can also help lenders see trouble coming.
A customer who shared bank data at application can, with ongoing consent, give the lender a clearer view of whether income has changed, or whether other commitments have grown. Lenders can use that to offer a plan before a payment fails, rather than after several have.
This needs care. Customers must understand what they're agreeing to, and lenders must use the data to help, not to collect more aggressively. Used that way, it's exactly the kind of proactive support the Consumer Duty encourages.
What to avoid
Repeated card retries on the same day can push customers into unarranged overdrafts, which costs them more than the original missed payment. Retries timed to land just after payday can look like the lender is putting itself first. Long chains of reminders that don't offer any way to pay, or any way to ask for help, frustrate customers and invite complaints.
Under the new regime, each of these is a conduct risk as well as a customer experience problem.
Fairer arrears handling in practice
It starts with separating timing failures from genuine difficulty as early as possible. Customers should have a repay-now link that works from any of their accounts, and be able to make partial payments and change dates without a phone call. Card retry rules are worth reviewing for overdraft risk. Every arrears message should signpost free debt advice clearly. And lenders should keep a record of what support was offered and when.
How Fena helps
Fena is an FCA-regulated open banking provider. BNPL lenders can use our payment links and API to send repay-now and catch-up requests that customers pay from any of their bank accounts, with instant confirmation. Our account information services provide consented bank data to support affordability checks and earlier, better-targeted help for customers who may be struggling.
Common questions
Can BNPL lenders still charge late fees?
Lenders must follow the FCA's rules and the Consumer Duty, which require fair treatment and support for customers in difficulty. Check the FCA's final rules for the detailed position on charges.
Does pay by bank stop missed payments completely?
No. It removes failures caused by expired cards and the wrong account, and makes catching up easier. Customers in genuine difficulty still need support.
Can customers repay from a different bank account?
Yes. With pay by bank, the customer chooses which of their accounts to pay from every time.
Is ongoing access to bank data allowed?
Only with the customer's clear consent, for a defined purpose and period. The customer can withdraw it at any time.
Article by
Gosia Furmanik
CEO and Founder
Published on
