CFPB Sets Strict BNPL Lender Billing Rules

The CFPB plans to issue FAQs in September to clarify the application of existing regulations to BNPL products.

The forthcoming FAQs are expected to provide much-needed clarity on these regulatory issues. However, the broader impact on BNPL providers and consumers remains to be seen.

Director Rohit Chopra has indicated a transitional period for companies to adapt to new regulatory interpretations without immediate penalty risks.

The CFPB wants to use Regulation Z, which usually applies to credit cards, for BNPL (Buy Now, Pay Later) products. This has caused some worries for BNPL companies.

The CFPB's interpretive rule, which became applicable on July 30, requires BNPL providers to issue regular billing statements, offer refunds for undelivered goods or services, and allow customers to dispute charges. This has led to significant industry pushback, with requests for extensions to allow more time for compliance.

The CFPB has stated that companies making a good faith effort to comply with the new regulations will not face penalties during the transition. However, the definition of what constitutes a "good faith effort" remains somewhat ambiguous, leading to concerns among industry stakeholders about the clarity and enforceability of this provision.

Our Opinion

The CFPB is setting tough new rules for Buy Now, Pay Later (BNPL) companies, treating them like credit card issuers. These strict rules are hard to follow and might slow down new ideas in the industry. While companies have some time to adjust, these changes could really shake up how BNPL works.

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