Do You Need FCA Authorisation to Offer 0% Finance or Buy Now, Pay Later?
Offering 0% finance or ‘buy now, pay later’ has become a standard part of modern marketing across a wide range of industries. Consumers expect to see it and many businesses now treat it as a simple, low-risk way to increase sales and generate interest.
That assumption is where the problem starts, as many businesses fall into the trap of believing that the finance provider will take full responsibility. However, the reality is that promoting or even introducing finance can fall within regulated activity under FCA rules.
These rules are not limited to one sector and apply to any business offering finance to customers. Getting it wrong can lead to serious consequences, including fines, enforcement action and reputational damage. This guide explains what counts as offering finance, how financial promotions are regulated and whether your business needs FCA authorisation.
What counts as ‘offering finance’?
When your business moves from simply selling a product or service into being involved in the customer’s access to finance, you may have crossed into credit broking in the eyes of the FCA. When a business offers finance, it does not just mean that you are lending money yourself, as it could include promoting finance options, referring customers to a lender or helping customers to complete applications. Even an informal conversation can count if you are influencing the decision of the customer.
This is where credit broking begins, and that can be considered to be an FCA regulated activity.
What is credit broking?
Credit broking occurs when you introduce a customer to a lender, and it is important to remember that you do not need to handle money yourself to be regulated. Your business will be considered to be credit broking if you recommend a finance option or pass customer details onto a lender. Displaying finance as a payment option can also be considered credit broking, depending on how it is presented and whether you are influencing the customer’s decision.
In real terms, this could be a car dealership that offers finance packages, a dental clinic offering payment plans, or a retail store offering ‘pay monthly’ options.
Do you always need FCA authorisation?
In many cases, you will need to be authorised or regulated in some way, and there are two main routes to achieve this. You could opt for direct FCA authorisation, or you could become an Appointed Representative (AR).
When exploring this route, some businesses consider becoming an Introducer Appointed Representative (IAR), which is often seen as a quicker and simpler way to start offering finance. This model is frequently misunderstood and, in some cases, overused. While it can be appropriate in the right circumstances, it still involves regulatory responsibility and ongoing oversight from the Principal firm.
Businesses operating as an IAR must work within defined boundaries and cannot assume that this removes their compliance obligations. It is important to fully understand how the model works and whether it is suitable for your business before relying on it as a solution.
This is not always a clear-cut decision. Some businesses may qualify for limited permission, and there are also specific exemptions that can apply. However, these are narrow and often misunderstood, which is where many businesses get it wrong.
Are there any exceptions to FCA authorisation?
There are limited circumstances where a business can offer finance without FCA authorisation, but these are very specific and often misunderstood.
One of the most common exemptions applies where the finance arrangement meets all of the following criteria:
- The agreement lasts no more than 12 months
- The total is repaid at no more than 12 equal instalments
- No interest or additional fees are charged
This type of arrangement can either be self-funded by the business or introduced through a third-party lender or broker, and can include certain buy now, pay later models where the same criteria are met.
It is important to recognise that this exemption creates a very narrow window in practice. The limits on repayment terms and the requirement for equal instalments can restrict affordability, which in turn limits the overall value of the product or service that can realistically be offered.
As a result, while this route may be technically available, it is not always commercially viable for higher-value transactions.
What about 0% finance?
Almost any high-ticket purchase has a 0% finance label slapped on it, so it can be easy to think that anyone can offer this. It is important that businesses understand that 0% finance is still regulated in just the same way that ‘interest-free’ does not mean ‘outside FCA rules’.
Businesses also cannot avoid regulation by using a third-party lender. Promoting 0% finance will usually be considered to be a financial promotion, which is then regulated. Just because you are not applying interest does not mean that your financial promotion is not subject to regulation.
What about ‘buy now, pay later’?
Another trend that we have seen for many years is to offer a ‘buy now, pay later’ option. This has historically been treated differently from other forms of credit, although regulation in this area is tightening. This means that even if the lender carries regulatory responsibility, the business that promotes it still has their own obligations that need to be fulfilled. This is not something that can be dodged, as FCA scrutiny in this area is increasing steadily to avoid the risk of misleading promotions and to ensure the importance of clear and fair messaging.
Common scenarios where businesses get this wrong
There are many businesses who get these kinds of financial promotions wrong, and it is easy to do. Some businesses believe they are not involved in finance if they just point customers in the direction of a finance provider. However, this is seen as a form of introduction which is classed as credit broking under FCA rules. It does not matter whether money is handled or not, the act of connecting the customer to finance is the trigger point.
We also hear of businesses who were told by their lenders that they do not need to worry. They think that if the finance company is FCA authorised, the responsibility sits entirely with them, but this can still be wrong. The lender is only responsible for their own activity and not yours, so your business activities such as promotion and introduction will be assessed separately. This means that you may still need FCA authorisation or Appointed Representative status, as being linked to an authorised lender does not automatically make you compliant.
There are also businesses who only offer finance occasionally. They feel that if it is not a core part of their business, it does not count. The FCA view financial promotions based on activity, not frequency, so even one single introduction can fall within credit broking. There is no ‘minimum threshold’ for relevance and so occasional activity will still be classed as regulated activity.
When a process is digital or automated, businesses can feel that they are not directly involved, but this is not the case. It can still be regulated if the business directs customers to the online application or embeds finance links on their own website. If you promote finance as an option, then you are still part of the finance journey. Just because something is digital, it does not remove your responsibility.
Advertising 0% finance but not arranging it can seem harmless, but this can be a significant error. Advertising finance is considered to be a financial promotion, which is heavily regulated by the FCA. You must ensure there is clear, fair and not misleading messaging and representative APR examples where required. All of your advertising also needs to include proper disclaimers, as even marketing on its own can trigger compliance obligations.
Some businesses feel protected if the finance company has provided them with the wording that they need to use. This does not remove the risk as you are still responsible for how that wording is used. Things like placement, context, and presentation all matter, and copy can quickly become misleading depending on its layout, emphasis and any information that might be missing. Compliance is not just about the specific wording, but also how it is communicated to the customer.
Regulation can still apply even if no commission is received. Payment is not the trigger for regulation – it is the activity that counts, and so even unpaid introductions can fall within the scope of credit broking.
The risks of getting it wrong
Every action has consequences and offering finance in the wrong way is not without repercussions. Any problems with your financial promotions can lead to FCA enforcement action as well as some significant fines and penalties. You may also be required to stop offering finance immediately, which can lead to reputational damage and a potential impact on customer trust.
What should businesses do next?
If you are already issuing or communicating financial promotions or planning to introduce them, then it is important to review how this finance is offered. Look at whether your activities fall under credit broking and check if authorisation or AR status is required. You will also need to review your financial promotions across your website, advertising and social media.
It is important to remember that compliance should be something that is proactive, not reactive, in order to avoid any long-term headaches.
Offering finance is an incredibly powerful tool for the growth of almost any business, but it also brings regulatory responsibility that should not be ignored. Many businesses go wrong by making assumptions, so getting clarity early from experts such as The Compliance Guys can avoid much bigger problems further down the line. If you are unsure whether your business needs FCA authorisation, then get in touch today to find out.
