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BNPL providers such as Affirm, Klarna and Afterpay partner with
retailers to finance customer purchases, which shoppers repay in
installments. The sector has become a major source of credit,
but lacks a federal oversight framework.
Under an interpretive rule issued by the CFPB on Wednesday, BNPL
lenders will be required to investigate customer disputes,
refund products that have been returned, and provide periodic
billing statements - all requirements that credit card companies
currently comply with under the Truth in Lending Act.
"Regardless of whether a shopper swipes a credit card or uses
Buy Now, Pay Later, they are entitled to important consumer
protections under longstanding laws and regulations already on
the books," said CFPB Director Rohit Chopra in a statement.
Most major BNPL providers already voluntarily comply with credit
card-like protections, but the new rule should offer consistency
across the sector, a CFPB official told reporters.
The rule will only apply to the popular "pay in four"
installment product, the official said. And BNPL providers will
not be required to comply with some other credit card rules,
such as assessing a consumer's ability to repay, the agency
said.
BNPL loans drove $75 billion in online spending in 2023, up
14.3% from 2022, according to Adobe Analytics.
According to a 2022 CFPB report, consumers often use BNPL as a
substitute for conventional credit cards but consumer protection
disclosures vary across major providers, and the loans can lead
consumers to become over-indebted.
Under Chopra, the CFPB has cracked down on tech companies as
they encroach on the traditional financial sector, proposing
that it supervise payment services from Google and Apple and
scrutinizing how tech giants use consumer payment data.
The interpretive rule is open to comments until Aug. 1 and will
be effective in 60 days, a CFPB official said.
(Reporting by Hannah Lang in New York; editing by Michelle Price
and Lincoln Feast.)
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