The Consumer Financial Protection Bureau’s (interpretive rule) for Buy Now, Pay Later (BNPL) products classifies them as “credit cards” and their providers as “card issuers” and “creditors” under the Truth in Lending Act and Regulation Z. This regulatory shift imposes significant compliance obligations on retailers that offer BNPL options.
Previously, BNPL products were generally considered outside the scope of Regulation Z. The new interpretive rule redefines the phrase “other single credit device” to include digital user accounts used to access BNPL credit for purchases through websites and mobile apps.
Retailers must immediately evaluate the rule’s potential impact on their operations. They are now expected to anticipate and adhere to possible federal and state-level compliance requirements. The regulation explicitly applies to each business offering or extending credit, hinting that retailers may also fall under CFPB supervision if they promote or advertise third-party BNPL products.
Accordingly, retailers should work with legal counsel to implement oversight policies for third-party BNPL providers to ensure compliance with Regulation Z. This oversight should focus on the BNPL partners’ adherence to timing requirements for periodic billing statements, which may prove to be one of the most significant operational challenges due to the nature of BNPL products.
Third-party BNPL providers must comply with Subpart B of Regulation Z, which includes provisions such as mailing periodic statements at least 14 days before the payment due date, providing properly formatted periodic statements, and adhering to requirements for billing errors resolution.
Retailers should conduct annual audits of their BNPL partners and quickly address any issues of material non-compliance to avoid scrutiny from the CFPB. Some BNPL providers have criticized the CFPB for applying outdated regulatory frameworks to BNPL products, with certain advocates calling for the rule’s withdrawal.
The interpretive rule also suggests potential future regulations, including state-level oversight, which may result in BNPL providers needing to obtain state lending licenses and retailers acquiring state licenses to offer these products. This aligns with analysts’ predictions that further regulation is likely, given the substantial growth and increased regulatory scrutiny of BNPL products in recent years.