BNPL Accounts = Credit Cards Says CFPB

Krasimira Nevenova / AdobeStock

The Consumer Financial Protection Bureau is wasting no time flexing its muscles now that the Supreme Court has confirmed its funding structure is constitutional. Today, the CFPB announced via press release that it was issuing an Interpretive Rule (Rule) to confirm that Buy Now Pay Later (BNPL) lenders are credit card providers. The Rule lists the requirements for BNPL lenders regarding dispute investigations, consumer refunds or cancellation of services, and billing statements. 

In prepared remarks published in tandem with the press release, Director Chopra stated that "Essentially, any mechanism, tool, or procedure that consumers can use from time to time to buy goods or services on credit gets the protections that consumers have come to know and expect with credit cards." Heavily citing its own research on BNPL products and the financial profiles of BNPL borrowers, the CFPB reasoned that because BNPL lenders typically meet the criteria of traditional credit card providers, they must extend many of the same rights and protections to consumers found in both the Truth in Lending Act (TILA) and Regulation Z. 

For purposes of the Rule, BNPL refers to "a consumer loan for a retail transaction that is repaid in four (or fewer) interest-free installments and does not otherwise impose a finance charge." (see page 4). The Rule details how and why BNPL lenders meet the definition of "card issuers" under TILA and subpart B of Regulation Z; however, it also says that lenders that issue digital user accounts to access BNPL credit are generally not subject to the credit card regulations appearing in subpart G of Regulation Z (e.g., penalty fee limits and ability-to-repay requirements).

View this content by subscribing

Please register to unlock this content

I already have an account. Log in