CFPB planning standards for nonbank ‘buy now, pay later’ lenders

Sep. 16, 2022

The Consumer Financial Protection Bureau said it is developing consumer protections for “buy now, pay later” products similar to those that apply to credit cards.

Protections Lacking: In a new report, the CFPB said some BNPL products lack protections that are standard elsewhere in the consumer financial marketplace, such as cost-of-credit disclosures. It also says many tech-based BNPL lenders are shifting their business models to focus on harvesting and monetizing consumer data as well as encouraging consumers to buy and borrow more.

New Standards: The CFPB said it will identify potential interpretive guidance or rules requiring BNPL lenders to adhere to existing protections related to credit cards, including being subject to supervisory examinations.

Privacy Concerns: In a separate report last month, the CFPB said it is developing a rule under Section 1033 of the Dodd-Frank Act to establish standards for sharing consumer financial data to address privacy risks posed by BNPL and other new consumer payments capabilities.

ICBA Position: The reports align with ICBA calls for greater parity between nonbank BNPL providers and more traditional credit products. In a comment letter earlier this year, ICBA called on the CFPB to:

  • Provide disclosures and protections to consumers on par with the Truth in Lending Act to promote transparency.

  • Report positive repayment history and open accounts to credit reporting agencies.

  • Incorporate BNPL products into a regulated ecosystem where supervised entities have experience complying with consumer protections.