The Consumer Financial Protection Bureau (CFPB) has recently published a compliance aid to clarify its May 2024 interpretive rule regarding Buy Now, Pay Later (BNPL) products, specifically classifying certain providers as card issuers under Regulation Z. This compliance aid, presented in the form of FAQs, addresses confusion surrounding the definition of "digital user accounts" and the types of loans covered by the rule. The CFPB distinguishes between "Pay-in-Four BNPL Loans," which are subject to the interpretive rule, and other forms of BNPL products that are not. Key clarifications include the definition of covered digital user accounts and the requirement for periodic statements for loans exceeding a $1 balance. The FAQs also specify that Pay-in-Four BNPL Loans are treated as closed-end charge card transactions, thus only certain Regulation Z provisions apply. Providers of BNPL products must reassess their operations in light of these updates to ensure compliance.
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