The Consumer Financial Protection Bureau (CFPB) recently released FAQs that provide guidance on applying Regulation Z to Pay-in-Four Buy Now, Pay Later (BNPL) products accessed through digital user accounts (DUAs). This follows an interpretive rule from May that categorized BNPL transactions under credit card regulations. The FAQs clarify that Pay-in-Four BNPL loans are considered closed-end installment loans, and DUAs are classified as both credit and charge cards under Regulation Z. This classification imposes several regulatory requirements on BNPL providers, including the need for periodic statements and specific payment treatment. However, the FAQs also reveal internal inconsistencies and interpretations that may conflict with the Truth in Lending Act (TILA), raising potential legal challenges for BNPL providers. Despite the complexities, the FAQs do offer some positive changes, such as allowing transaction-level statements. Overall, the CFPB's guidance presents both clarifications and challenges for the BNPL industry.
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