The Consumer Financial Protection Bureau announced plans to withdraw its May 2024 rule that subjected BNPL providers to the same regulations as credit card providers under the Truth in Lending Act, including the right to dispute charges and demand a refund from the lender after returning a product, as well as provide periodic billing statements like the ones received for classic credit card accounts.
The rule took effect at the end of last July, but BNPL providers were given additional time to update their operations in compliance. Now BNPL providers don't have to worry anymore about compliance, as the rules have been withdrawn prior to when enforcement began.
The move comes as part of a broader pullback of regulations by the Trump administration that were initiated during the Biden administration.
The new regulations implemented last year were ill-fitted to regulate BNPL, faced immediate opposition from BNPL providers, and led to a lawsuit filed by the Financial Technology Association that argued that the CFPB exceeded its authority in issuing the rules.
It's not necessarily a complete loss for consumers that the rules were repealed. Unfortunately though, I don't imagine we'll see any new better-fitted regulation proposed anytime soon, as Trump is seeking to dismantle the agency altogether.
In fact, last week, the CFPB just barely escaped death by 1,000 executive orders. A federal judge agreed Friday to temporarily block the Trump administration from dismantling the CFPB until she rules on the merits of a lawsuit seeking to preserve the agency.
U.S. District Judge Amy Berman Jackson said in her order:
“If the defendants are not enjoined, they will eliminate the agency before the Court has the opportunity to decide whether the law permits them to do it, and as the defendants’ own witness warned, the harm will be irreparable.”
The Consumer Financial Protection Bureau was created in 2011 under the Dodd-Frank Wall Street Reform and Consumer Protection Act following the 2007-2008 financial crisis to protect consumers from unfair, deceptive, or abusive practices by financial institutions after the financial crisis exposed the need for such a dedicated agency.