The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule classifying Buy Now, Pay Later (BNPL) products as credit cards and their providers as card issuers and creditors under the Truth in Lending Act and Regulation Z. This rule is now in effect, requiring immediate compliance from retailers and BNPL providers. The change comes in response to the rapid growth of BNPL offerings and heightened regulatory scrutiny, following a 2022 report that highlighted risks such as lack of standardized disclosures and potential consumer overextension. Retailers must evaluate the implications of this rule on their business practices, particularly regarding compliance with open-end credit provisions. The rule mandates that BNPL providers adhere to specific requirements, including timely periodic billing statements and proper error resolution processes. As regulatory oversight may extend to retailers promoting BNPL products, it’s crucial for them to implement vendor oversight policies and conduct annual audits to ensure compliance. Further regulations may follow as state regulators join the CFPB in oversight.
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