It's one of the most common assumptions in retail finance: “it's interest-free, so we don't need a licence.” Sometimes that's right. Often it isn't. The exemption is real but narrow, and getting it wrong can mean trading without authorisation you actually needed. Here's the precise rule.
The short answer is: sometimes — but only if your arrangement meets every part of a specific exemption, and only if you are the lender rather than introducing customers to one. Charging 0% interest is one condition among several, not a free pass on its own.
The interest-free exemption, in full
There is a genuine exemption for certain instalment credit, but the FCA sets the bar precisely. Your arrangement is likely exempt from authorisation only if all of the following are true at once:
The credit is genuinely interest-free; it carries no other charges of any kind — no administration fees, no arrangement fees, no default or late-payment charges; it is repaid within a maximum of 12 months; and it is repaid in no more than 12 instalments. Miss any one of these and the exemption falls away. A “0% finance” deal that adds a £25 admin fee, or spreads payment over 18 months, is not exempt — even though it charges no interest.
This is where most businesses trip up. They focus on the headline — “interest-free” — and overlook that a single fee, or a payment term beyond a year, takes them straight back inside the regulated perimeter.
Lending versus introducing: the part everyone misses
The exemption above applies to the credit agreement itself. But many businesses don't lend at all — they introduce the customer to a third-party lender or finance provider. That activity is credit broking, and it is regulated in its own right, regardless of whether the finance the customer ends up taking is interest-free.
So the question splits in two. If you provide the 0% credit yourself and it meets the exemption, you may not need authorisation as a lender. But if you introduce customers to a lender — the typical retail “spread the cost” arrangement — you are almost certainly broking, and broking generally needs FCA permission even when the underlying finance is free to the customer.
The FCA's own guidance is blunt on this: a retailer selling goods or services who arranges finance with a third-party lender is likely to be carrying on credit broking. The interest rate on that finance doesn't change the answer.
What changes on 15 July 2026
From 15 July 2026, the rules on interest-free “buy now, pay later” style credit — which the FCA calls Deferred Payment Credit (DPC) — change. Interest-free credit repayable in 12 or fewer instalments within 12 months, used to finance goods or services from a third party, becomes a regulated agreement. The lender providing that credit will need authorisation (or to use the Temporary Permissions Regime).
Importantly for most shops and showrooms: merchants who introduce customers to a DPC product remain exempt from needing a credit broking licence for that specific activity — this includes domestic-premises suppliers. But if your finance offering goes beyond that narrow DPC definition — longer terms, interest, or other charges — the ordinary broking rules apply and authorisation is likely needed. Our guide to the July 2026 BNPL changes covers this in detail.
The practical test for your business
Ask yourself three questions. First: do you lend the money yourself, or introduce the customer to someone who does? If you introduce, you're likely broking. Second: if you lend, is the credit completely free of interest and every other charge, repaid within 12 months across no more than 12 payments? If not, the exemption doesn't apply. Third: do you do this by way of business, as part of selling your goods or services? If yes, and you're broking or lending outside the exemption, you need authorisation.
For the great majority of businesses offering customer finance — car dealers, retailers, clinics, home-improvement firms — the answer is that they are broking, and they need limited permission credit broking authorisation. The 0% nature of the finance is reassuring to customers, but it does not remove the requirement.
Why getting this wrong matters
Carrying on a regulated activity without authorisation is a criminal offence, and agreements made in the course of it can be unenforceable. If a customer disputes their finance, or a lender reviews its introducer arrangements, “we assumed 0% meant we were exempt” is not a position any business wants to be defending. The cost and time of getting authorised properly are modest next to that risk — see what's actually at stake when you offer finance without authorisation.
Frequently asked questions
- Do I need an FCA licence if my finance is interest-free?
Not automatically. Interest-free is only one condition of the exemption. To be exempt as a lender, the credit must also carry no other charges of any kind, be repaid within 12 months, and be repaid in no more than 12 instalments — and you must be lending it yourself, not introducing customers to a third-party lender. If you introduce customers to a lender, that is credit broking and generally needs authorisation regardless of the interest rate.
- Does charging an admin or late fee affect the 0% exemption?
Yes. The exemption requires the credit to be free of interest and all other charges, including administration fees, arrangement fees, and default or late-payment charges. A single fee takes the arrangement outside the exemption, even if no interest is charged.
- If I introduce customers to a 0% finance provider, am I exempt?
Usually not. Introducing or effecting an introduction to a lender is credit broking, which is a regulated activity in its own right. The fact that the finance is interest-free does not remove the need for broking authorisation. Most retailers arranging third-party finance need limited permission credit broking.
- What happens to 0% buy now, pay later from 15 July 2026?
From 15 July 2026, interest-free credit repayable in 12 or fewer instalments within 12 months that finances third-party goods or services becomes a regulated Deferred Payment Credit agreement. The lender needs authorisation. Merchants who simply introduce customers to a DPC product, including domestic-premises suppliers, remain exempt from needing a credit broking licence for that activity — but other finance arrangements still follow the ordinary rules.
- Is offering credit without the right authorisation illegal?
Carrying on a regulated activity, such as credit broking, without the authorisation you need is a criminal offence, and the credit agreements involved can be unenforceable. It is the business's responsibility to determine whether its arrangement is exempt; if there is any doubt, take independent advice or apply for the appropriate permission.
This article is general information to help you understand the process, and is not legal or regulatory advice. CreditLicence is a regulatory consultancy; it is not authorised or regulated by the Financial Conduct Authority, nothing it provides is regulated advice, and it is not affiliated with, endorsed by, or acting on behalf of the FCA. FCA rules can change; always check the FCA's website for the current position.