The Consumer Financial Protection Bureau announced it will no longer prioritize enforcement actions taken on BNPL transactions, in accordance with a Biden administration issued rule that classified BNPL providers as credit card issuers and subjected them to the Truth in Lending Act. They wrote in a statement:
“The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans. The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses. The Bureau is further contemplating taking appropriate action to rescind Buy Now, Pay Later.”
I'm confused… are servicemen and veterans more susceptible to predatory lending than other consumers?
Here's a quick history of what went down:
- May 2024 – The CFPB issued a rule that required BNPL lenders to provide consumers the same key legal protections and rights that apply to conventional credit cards, including the right to dispute charges, demand a refund from the lender after returning a product, and provide periodic billing statements, effectively labeling BNPL companies as credit card providers and requiring that they meet the same criteria under the Truth in Lending Act.
- The CFPB set a deadline of Aug 1, 2024 for companies to adhere to the new rules and opened up a commentary period during the two months prior, during which major BNPL players expressed their dissatisfaction with the rules, arguing that the CFPB's approach was misguided and that BNPL products are fundamentally different from credit cards and should not be regulated under the same framework.
- October 2024 – The Financial Technology Association filed a lawsuit challenging the CFPB's new rule on BNPL products, saying that the rule “oversteps legal bounds.”
- March 2025 – The CFPB announced plans to withdraw the rules, which took effect at the end of last July (however BNPL providers were given additional time to update their operations in compliance).
- May 2025 – Now the CFPB said it wouldn't enforce the rules (which technically are still in place), and that they are considering rescinding them. Either way, BNPL companies have nothing to worry about for at least the next three and a half years when it comes to following the rules.
Eric Chaffee, professor of law at Case Western Reserve University School of Law, said:
“The CFPB's decision not to prioritize enforcement actions taken on the basis of buy now, pay later loans is troubling. With increased prices associated with tariffs and the economy teetering on the edge of a recession, more Americans are going to use these loans for necessities. This creates a substantial risk that many of these consumers will be trapped in endless debt and taken advantage of by unscrupulous lenders. While some deregulation might be warranted in this space, the CFPB's stance is likely an overcorrection.”
If you've been reading this newsletter long enough, you know that I've been a big proponent of BNPL regulation since the lending type first came into existence. Regulation is long overdue, and I honestly can't believe that BNPL companies have been able to skirt credit lending rules for as long as they have. Categorizing BNPL providers as credit cards was the wrong move, but not having any regulation is even worse. It's time for US regulation on lending to catch up to the times, but I don't expect that to happen during this administration.