CFPB Orders That BNPL Lenders Be Classified As Credit Card Firms
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The Consumer Financial Protection Bureau has made a new regulation stating that buy now, pay later firms should be considered credit card providers. According to its press release, the agency said BNPL companies must provide the exact consumer protections credit card companies offer.
The New CFPB Rule Focuses On Customer’s Protection
The new CFPB rule aims to protect customers using the buy now, pay later service. A spokesperson in CFPB revealed in an email that the new regulations cover what’s needed to resolve disputes, rights to customer refunds, billing statements, and disclosures.
The agency began investigating buy now, pay later offerings in 2021. This service enables customers to pay for their purchases in two installments. Many companies offering the option reported significant gains during the COVID-19 period the same year.
In 2023, the agency issued another report, revealing the financial profiles of buy now, pay later users. The ruling on 22 May is the first time the agency moved to regulate the BNPL industry.
The bureau explained why it treated BNPL companies like credit card providers. It said in the press release that the loans acted as a similar choice to credit cards when customers bought things in stores or online. The release also pointed out that, similar to credit cards, BNPL loans offer credit services, handle payments, and charge transaction fees to stores.
The CFPB spokesperson revealed that the agency took the initiative to investigate how already established laws apply to the buy now, pay later business model. The advocate noted that the bureau carefully examined the laws and discovered that some parts of TILA and its rules apply to BNPL loans as they are now.
The Buy Now, Pay Later Offering Extends To Local Stores
Companies like Zip, PayPal, Klarna, Afterpay, and Affirm first provided the buy now, pay later service. The service is now available in stores. Furthermore, some companies that offer the buy now pay later service are distributing physical cards that allow customers to use the option for many card purchases.
A spokesperson from Affirm also spoke about the latest development, revealing that the company trusts CFPB’s move to promote consistent industry standards.
These standards have already influenced Affirm’s operations in providing transparency and more opportunities to cater to customer choices. The spokesperson added that the company is committed to continue communicating with CFPB.
Affirm aims to stay ahead with up-to-date information from the Consumer Financial Protection Bureau as it seeks to enhance the value and experience offered to its customers. Its spokesperson said the company also plans to improve its operations and practices.
