Buy now, pay later (BNPL) has seen a surge in popularity, offering consumers interest-free financing on purchases, repayable in four or fewer installments. Unlike traditional loans, BNPL products escape certain consumer financial protection regulations, attracting FinTechs and now banks to the sector despite lower profit margins. However, as adoption rises, so does regulatory scrutiny from bodies like the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC). Potential areas for regulation include standardized credit disclosures, autopay practices, dispute resolution, consumer risk management, and data harvesting. BNPL providers are advised to pre-emptively address these concerns to maintain a valuable, compliant service.
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