New York Budget Includes Strict Licensing for BNPL Companies

Earlier this month, New York state introduced legislation that imposes strict licensing requirements and other rules on Buy Now, Pay Later (BNPL) products as part of Governor Kathy Hochul’s new budget, which also includes several other measures focused on consumer protection. To operate in the state, BNPL companies would have to obtain a license from New York’s Department of Financial Services. 

“This budget is all about affordability — lowering costs and helping New Yorkers with the rising cost of living,” Hochul said in a press release accompanying her signing of the state budget. “These new laws are about fairness, transparency and accountability and will help consumers save money and spend it wisely.”

The legislation states that BNPL interest rates cannot exceed New York’s 16 percent cap and loans have to carry some of the credit card protections mandated by the Truth in Lending Act. Bloomberg Law noted that while many BNPL providers do not charge interest, many charge convenience fees and late fees.

The legislation will also include safety measures such as disclosure requirements, data privacy protections, and dispute resolution standards. State lawmakers plan to exempt national banks that issue BNPL loans through partnerships with fintech providers, but banks with charters from other states would be required to comply with the legislation.

The American Fintech Council stated that while many of the state’s provisions align with their own BNPL standards, other language may reduce credit access and limit consumer choice. American Fintech Council CEO Phil Goldfeder said that “the language would improperly apply regulations designed specifically for credit cards to the emerging pay-over-time sector.”

BNPL regulation is currently being rolled back at the federal level, as the Consumer Financial Protection Bureau (CFPB) recently announced that it would rescind its earlier proposal to treat BNPL companies like credit card issuers.