CFPB Proposes Regulating BNPL Loans Like Credit Cards

Last week, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that considers Buy Now, Pay Later (BNPL) lenders to be credit card providers. The Bureau says that the move is meant to protect more consumers in the same ways as conventional credit cards, such as giving consumers the right to dispute charges and demand a refund from lenders after returning an item purchased via BNPL.

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

The CFPB began its inquiry of the BNPL market over two years ago and has urged consistency in it. Under the new rule, BNPL lenders are required to investigate disputes from consumers, pause payment requirements during those investigations, credit refunds to consumers’ accounts, and provide periodic billing statements similar to credit card accounts.

According to PYMNTS, more than half of U.S. consumers between ages 25 and 44 have used BNPL at least once. The CFPB also found in a market report that over 13 percent of BNPL transactions included a return or dispute. At five surveyed firms in 2021, consumers returned or disputed $1.8 billion in transactions. 

“Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books,” Chopra said. 

BNPL provider Klarna responded to the rule, stating that it does not require many major changes to its business, but that the CFPB still needs to acknowledge fundamental differences between credit cards and BNPL.