Do lenders have to be FCA registered?

In most cases, yes. FCA authorisation is a legal requirement for firms carrying out regulated lending. A narrow exemption exists for short, interest-free instalment arrangements, but it is tightly drawn and easy to fall outside.

Which activities require authorisation

A firm must be authorised by the FCA if it is:

• Lending money
• Selling goods on credit
• Offering credit cards
• Arranging credit for others
• Collecting or buying consumer credit debts
• Providing debt advice or services

The scope of regulated credit activity is set out in the FCA’s Perimeter Guidance (opens handbook.fca.org.uk in a new tab), with the conduct requirements in CONC (opens handbook.fca.org.uk in a new tab).

The exemption

There are minimal exceptions, aimed at lower-risk, short-term arrangements. The main one is the interest-free instalment credit exemption, which requires all of the following:

• The credit agreement runs for less than 12 months
• Repayment is in no more than 12 instalments
• No interest or other fees are charged

Where all three conditions are met, the lender does not need FCA authorisation.

Buy now, pay later providers have historically operated under this exemption for certain products. That position is changing: BNPL agreements are being brought into regulation, so firms relying on the exemption for BNPL-style products should be tracking the timetable rather than assuming continuity.

If you are close to the line

The exemption fails if any one of the three conditions is missed - a single fee, a thirteenth instalment, or a term running a day past twelve months. Firms that structure products near the boundary should establish where they sit before offering credit rather than afterwards.