CFPB says buy now, pay later firms must comply with U.S. credit card laws

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The Consumer Financial Protection Bureau declared on Wednesday that customers of the burgeoning buy now, pay later industry have the same federal protections as users of credit cards. The agency unveiled what it called an “interpretive rule” that deemed BNPL lenders essentially the same as traditional credit card providers under the decades-old Truth in Lending Act. The BNPL market is dominated by fintech firms like Affirm, Klarna and PayPal. Rohit Chopra, director of the CFPB, testifies during a House Financial Services Committee hearing on June 14, 2023. Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau declared on Wednesday that customers of the burgeoning buy now, pay later industry have the same federal protections as users of credit cards.

The agency unveiled what it called an “interpretive rule” that deemed BNPL lenders essentially the same as traditional credit card providers under the decades-old Truth in Lending Act.

That means the industry — currently dominated by fintech firms like Affirm, Klarna and PayPal — must make refunds for returned products or canceled services, must investigate merchant disputes and pause payments during those probes, and must provide bills with fee disclosures.

“Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under long-standing laws and regulations already on the books,” CFPB Director Rohit Chopra said in a release.

The CFPB, which last week was handed a crucial victory by the Supreme Court, has pushed hard against the U.S. financial industry, issuing rules that slashed credit card late fees and overdraft penalties. The agency, formed in the aftermath of the 2008 financial crisis, began investigating the BNPL industry in late 2021.

Surging debt

The use of digital installment loan-type services has ballooned in recent years, with volumes surging tenfold from 2019 to 2021, Chopra said during a media briefing. Among CFPB concerns are that some users are given more debt than they can handle, he said.

“Buy now, pay later is now a major part of our consumer credit market as these loans provide a meaningful alternative to other options for consumers,” Chopra told reporters. “The CFPB wants to make sure that these new competitive offerings are not gaining an advantage by sidestepping longstanding rights and responsibilities enshrined under the

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