On May 22, 2024, the Consumer Financial Protection Bureau (CFPB) issued an “interpretive rule” that regulates certain “Buy Now Pay Later” (BNPL) consumer transactions like credit cards. As an “interpretive rule,” the Bureau is providing guidance as to how existing law applies to covered BNPL transactions. It does not create any new law or regulation.
The rule is available here.
Based on the interpretive rule, BNPL lenders may be viewed as credit card providers. Accordingly, BNPL lenders must provide consumers with some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a BNPL loan.
The interpretive rule describes how BNPL lenders meet the criteria for credit card providers, under the Truth in Lending Act. For consumers, this means BNPL lenders must:
- Investigate disputes: BNPL lenders must investigate disputes that consumers initiate. Lenders must also pause payment requirements during the investigation and sometimes must issue credits.
- Refund returned products or cancelled services: When consumers return products or cancel services for a refund, BNPL lenders must credit the refunds to consumers’ accounts.
- Provide billing statements: Consumers must receive periodic billing statements like the ones received for classic credit card accounts.
The Rule does not provide an exception for existing BNPL paper. Thus, holders of covered BNPL transactions should review such transactions for compliance with the Truth in Lending Act.
The Rule is effective July 30.
The Bureau will accept comments on the Rule through August 1.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.