OCC issues guidance on ‘buy now, pay later’ lending

The OCC issued guidance to national banks and federal savings associations to address the risks associated with “buy now, pay later” lending.

Background: While "buy now, pay later," or BNPL, is widely used to describe various types of installment lending products, the OCC bulletin addresses BNPL loans that are payable in four or fewer installments and carry no finance charges. Loans with payment terms greater than four installments or that carry finance charges are treated as traditional installment loans and are therefore not within the scope of the bulletin.

Guidance Details: The guidance says:

  • Banks should maintain underwriting, repayment terms, pricing, and safeguards that minimize adverse customer outcomes and should ensure that marketing materials and disclosures are clear and conspicuous.

  • Prudent BNPL lending includes safeguards that minimize adverse customer outcomes.

  • The OCC expects banks that offer BNPL loans to do so in a manner that is safe and sound, provides fair access to financial services, supports fair treatment of consumers, and complies with applicable laws and regulations.

ICBA Position: ICBA has called for greater parity between nonbank BNPL providers and more traditional credit products. In a comment letter last year, ICBA called on the Consumer Financial Protection Bureau to incorporate BNPL products into a regulated ecosystem and provide for consumer disclosures and protections on par with the Truth in Lending Act.

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