The US Consumer Financial Protection Bureau (CFPB) has recently published a clarification on the regulations and laws governing the operations of ‘buy now, pay later’ (BNPL) lenders. In this reinterpretation, the CFPB asserts that BNPL providers should, in some aspects, be regulated similarly to credit-card providers. Bloomberg Tax reported on these developments.
BNPL lenders, such as Block Inc.’s Afterpay, Affirm Holdings Inc., and Klarna Bank AB have been experiencing increased scrutiny as their services become more mainstream. The tenant of this new interpretation is that like their counterparts in the credit card industry, BNPL companies must adhere to certain practices. There are specific requirements for investigating disputes, providing refunds for returned products or voided services, and sending billing statements to their customers.
The implications of this regulatory shift are significant. ‘Buy now, pay later’ platforms offer an alternative to traditional credit card purchases by allowing customers to delay payments or break them down into smaller, manageable installments. Should the CFPB’s interpretation be adopted industry-wide, these companies would be legally bound to similar consumer protection rules and regulations that govern credit-card providers.
However, it’s important to note that the CFPB’s interpretation doesn’t suggest BNPL services are entirely akin to credit cards. The full extent and application of these rules, and the precise ways in which they differ from those applied to credit card companies, will likely be clarified by the bureau in due course.