The Consumer Financial Protection Bureau (CFPB) recently published a compliance aid clarifying its May 2024 interpretive rule that categorizes certain Buy Now, Pay Later (BNPL) providers as card issuers under Regulation Z. The compliance aid, presented as FAQs, aims to resolve confusion surrounding the definition of "digital user accounts" and the types of loans covered by the rule. The CFPB specifically identifies "Pay-in-Four BNPL Loans" as the only BNPL products subject to this interpretive rule, defining them as closed-end installment loans with specific features, including no finance charges and repayment in four installments or less. The FAQs also outline what constitutes a "covered digital user account" and emphasize the requirement for periodic statements for consumers with balances over $1. This regulatory shift underscores the CFPB's ongoing scrutiny of BNPL products, prompting providers to reassess their operations and compliance strategies to align with the new guidelines.
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