💡 This guide is based on insights from FCA compliance experts, specialist agencies, and businesses that have successfully navigated the FCA approval process.

When you are looking to launch a subscription business in the UK, for products like bikes, electronics, furniture, or any other durable goods on a subscription basis, there's one regulator you need to know: The FCA (Financial Conduct Authority).

And if your business involves monthly payments, long-term rentals, or rent-to-own models, FCA compliance isn't optional. In fact Experts we spoke to highlighted,

“Just calling it a subscription doesn’t mean it’s not regulated — if it walks like credit, the FCA treats it like credit.”

In this guide, you'll learn:

• What is the FCA
• Why it matters for physical product subscriptions
• When you need FCA approval (and when you don't)
• What the application process looks like
• The biggest compliance mistakes to avoid

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What is the FCA?

The FCA is the UK’s financial regulator overseeing consumer credit and related activities. If your business model involves providing products to customers in exchange for monthly payments, it could fall under regulated consumer credit laws. In fact, UK law requires FCA authorisation for activities such as: selling goods on credit (including hire-purchase agreements) or hiring/leasing out goods to consumers for more than 3 months.

“In the UK, any subscription longer than 3 months could trigger FCA approval — even if there’s 0% interest.”

In practice, this means many “product-as-a-service” or rental subscription models are considered regulated financial activities, even if you don’t think of your company as a finance provider.

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What does the FCA do?

The Financial Conduct Authority (FCA) regulates financial services and consumer credit in the UK.

So why does that matter for a subscription business?

Because if you're letting customers use a product for monthly payments over a period longer than 3 months — or if they end up owning the product — you're very likely entering FCA territory.

That includes models like:

• Monthly subscriptions
• Monthly rentals
• Rent-to-own
• Lease-to-own
• Subscribe-to-own

Even if you call it a "subscription" or say it’s 0% interest... the structure matters more than the label.

Let’s break it down.

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Subscription, Rental, or Lease: Different Names, Same Regulatory Rules

When a customer pays monthly to access a product, the arrangement might be marketed as a “subscription,” “rental,” or “lease.” It could even be structured as “rent-to-own” or “subscribe-to-own” if the customer will eventually own the item. From a legal perspective, however, what matters is who owns the product during the term and whether the customer will own it after. This determines how the agreement is classified under the Consumer Credit Act 1974 (CCA) and FCA rules:

1. Straight Rentals / Subscriptions (Consumer Hire)

Summary: You retain ownership of the product, the customer pays monthly to use it, the contract is open-ended or exceeds 3 months then FCA regulation is required.

If your business retains ownership of the goods and the customer just hires or uses them for periodic payments, it’s a consumer hire agreement. In UK law, a consumer hire agreement that is capable of lasting more than 3 months is regulated by the CCA. This includes open-ended or rolling monthly subscriptions – even if a customer could theoretically cancel earlier, an indefinite term means the agreement “is still capable of lasting more than 3 months,” bringing it into regulatory scope. Example: A furniture subscription where a customer pays monthly and can keep the furniture as long as they keep paying. Legally, the company owns the furniture and the contract has no fixed end date, so it’s a regulated consumer hire.

2. Rent-to-Own / Subscribe-to-Own (Hire-Purchase or Credit)

Summary: Customer pays over time and owns the product eventually, FCA regulation is required.

If your model involves the customer owning the product at the end – whether automatically after a term or via an option to purchase – then it’s effectively a hire-purchase or conditional sale agreement (a form of consumer credit). Even if you don’t charge explicit interest, providing goods up front with payments over time is treated as extending credit . Example: A tech gadget subscription where the customer will own the device after 12 monthly payments. Legally, this is a credit agreement (the customer is buying on instalments), so it falls under regulated credit and requires FCA authorisation .

3. Short-Term or Trial Rentals

Summary: If you hire out goods for less than three months then you can avoid FCA but if there is any provision for extension, regulation may be required.

If you only hire out goods for a very short, fixed term (3 months or less) and the agreement ends or the item must be returned at that point, such short contracts might avoid regulation under the 3-month rule. However, be cautious – if there’s any provision for extension or rollover beyond 3 months, or successive short contracts that in reality allow continuous possession, regulators may still consider it a long-term hire. In practice, most viable subscription offerings run longer than 3 months, so nearly all consumer-focused product subscriptions in the UK will be regulated.

4. Business (B2B) Rentals

Summary: If you are leasing to only companies then FCA is not required, but self-employed customers count as consumers and therefore FCA may be required.

Renting or leasing goods only to incorporated businesses (Ltd companies) can be outside consumer regulation. But note that sole traders and small partnerships count as “consumers” under the law . If you offer subscriptions to, say, a self employed individual (even for work purposes), that agreement is likely treated as consumer hire or credit and would need FCA authorisation. Always check your customer’s status – purely B2B transactions (with no individuals liable) are generally exempt, but any dealings with individual customers means consumer credit rules apply.

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What happens if you ignore FCA requirements?

Offering regulated consumer hire or credit without FCA authorisation is a criminal offence in the UK and could result in

• Unlimited fines
• Up to 2 years in prison
• Void customer agreements

Plus, you risk:

• Customer complaints
• Lawsuits
• Bad PR

“FCA compliance isn’t just red tape — it protects your business from lawsuits, voided contracts, and criminal penalties.”

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How to get FCA approval (Step-by-Step)

First determine the type of approval you need and then decide if you want to file the approval yourself or through an agency.

Types of FCA Applications: Limited vs Full Scope

There are two key types of FCA applications:

Limited Permission (Limited Scope)

This is generally for businesses acting as intermediaries — for example, companies that introduce customers to third-party lenders or offer short-term leases with low risk.

You might qualify if:

• You're not charging interest or additional fees
• The lease or hire period is under 12 months
• The customer does not own the product at the end
• You’re not the ultimate finance provider

However, if you're leasing your own goods or managing ownership transfers, this route may not apply.

Full Permission (Full Scope)

Most subscription businesses, especially those funding the goods themselves or offering subscribe-to-own/rent-to-own models, will fall under this category.

“If your customers can own the product after payments, you’re in hire-purchase territory — and you probably need full FCA authorisation.”

You’ll need full permission if:

• You provide or arrange credit
• Your customers may eventually own the goods
• You set your own payment terms and take on credit risk

Choosing the right scope matters: applying for limited permission when you need full permission can delay your launch.

There are two ways to become FCA-compliant:

Option 1: Apply for FCA Authorisation

If you're offering regulated consumer hire or credit, this is your main route.

Here’s how it works:

• Choose your permissions (consumer hire, credit, broking)
• Apply through the FCA’s online portal
• Pay the application fee
• Prove you’re a "fit and proper" firm (business plan, systems, governance)
• Wait 3–6 months for approval

Option 2: Partner with an FCA-Authorised Firm

Not ready for your own licence?

You can:

• Become an Appointed Representative of a licensed firm
• Partner with a credit provider who handles the finance side

This can speed up time to market. But you still need to:

• Stay transparent
• Follow all FCA conduct rules
• Avoid misleading marketing

FCA compliance: What you’re on the hook for

Once you're FCA-authorised, compliance doesn’t stop.

You’ll need to:

1. Follow the Consumer Credit Act

• Include required info in contracts
• Provide pre-contract disclosures
• Give cancellation rights where required

2. Treat Customers Fairly (Consumer Duty)

The FCA’s new Consumer Duty (in effect since 2023) means:

• Clear pricing
• Fair product design
• Helpful support
• Good outcomes for customers

3. Market Transparently

No misleading claims like:

• "Free subscription" (when it's not)
• "Interest-free" (if there are hidden fees)
• "Own it in 12 months" (without showing total cost)

4. Assess Affordability (for Credit Models)

If your model involves ownership:

• Check that customers can afford payments
• Run soft credit checks or income assessments

FAQs about FCA and subscription businesses in the UK

#1 Do I need FCA approval if I don’t charge interest or fees?
Yes — even 0% interest models can be regulated. If your subscription leads to ownership or runs longer than 3 months, it may still be treated as a consumer credit or hire agreement.

#2 What’s the difference between consumer hire and hire-purchase?
Consumer hire means the customer never owns the product. Hire-purchase allows the customer to own it after making payments. The latter falls under stricter FCA rules and usually requires full permission.

#3 Can I avoid FCA rules by calling it a “subscription”?
No. The FCA looks at the substance of the agreement, not the marketing label. If your model meets the legal definitions of hire or credit, it's regulated.

#4 What if I only serve businesses?
B2B models involving only incorporated companies (Ltd) can be exempt. But if you serve sole traders, freelancers, or individuals, you may still fall under consumer credit regulation.

#5 How long does FCA authorisation take?
Typically 3–6 months, depending on your model and how complete your application is. Planning ahead is critical to avoid launch delays.

#6 Can I use another company’s FCA licence?
Yes — if you become an Appointed Representative of an authorised firm. This is common for early-stage startups looking to launch quickly.

#7 Are there FCA rules about automatic renewals or cancellations?
Yes — the FCA requires fair treatment. Auto-renewals and hard-to-cancel models may breach Consumer Duty obligations, especially if they cause financial harm.

#8 Is the FCA focused on physical products?
Not specifically — but any business offering finance-like models involving physical goods (bikes, furniture, phones, etc.) is within scope if the structure fits.

#9 How do I check if a company is FCA-authorised?
You can search the public register at register.fca.org.uk using the firm’s legal name. Look for permissions like consumer hire or credit broking.

Conclusion

Launching a product-as-a-service model in the UK is absolutely feasible, but don’t overlook FCA compliance. It should be one of the first considerations in your go-to-market strategy. By understanding the rules around consumer hire and credit, and securing the needed authorisation, you’ll avoid legal pitfalls and build a trustworthy, long-lasting subscription business.