The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule categorizing Buy Now, Pay Later (BNPL) lenders as “card issuers” under Regulation Z, which mandates compliance with consumer protection measures, including charge disputes and refunds. This decision comes after a significant increase in BNPL usage, with over $24 billion distributed through 180 million loans in 2021 alone. The CFPB's scrutiny of BNPL lenders began in 2021 due to concerns about accumulating debt and inadequate consumer protections, as many consumers faced challenges navigating disputes related to returns and billing issues. The rule, currently open for public comment until August 1, 2024, is based on the broad interpretation of the Truth in Lending Act (TILA), which encompasses digital credit products similar to traditional credit cards. Following the comment period, the CFPB will finalize the rule, which will take effect 60 days after publication, prompting BNPL lenders to prepare for compliance with new regulations.
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