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CFPB Boosts Buy Now, Pay Later Compliance with New Guidance

CFPB Boosts Buy Now, Pay Later Compliance with New Guidance

The Consumer Financial Protection Bureau (CFPB) is taking significant steps to enhance transparency and compliance in the Buy Now, Pay Later (BNPL) sector. By issuing an interpretive rule in May, the CFPB clarified how existing laws, such as the Truth in Lending Act and Regulation Z, apply to BNPL loans. This guidance aims to foster innovation and competition by ensuring that all market participants adhere to the same legal standards, thereby preventing any unfair advantages for those who might exploit loopholes. The response from the BNPL industry has been largely positive, with many companies actively seeking compliance and engaging with the CFPB to clarify specific regulatory requirements. To further assist lenders in this transition, the CFPB plans to release a set of Frequently Asked Questions next month. Importantly, the agency will not impose penalties on BNPL lenders who demonstrate good faith efforts to comply during this period, signaling a collaborative approach to regulation.

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