The Consumer Financial Protection Bureau (CFPB) has released an interpretive rule today, affirming that Buy Now, Pay Later (BNPL) lenders are considered credit card providers. As a result, BNPL lenders are required to offer consumers key legal protections and rights similar to those of traditional credit cards.
The Consumer Financial Protection Bureau (CFPB) has released an interpretive rule today, affirming that Buy Now, Pay Later (BNPL) lenders are considered credit card providers. As a result, BNPL lenders are required to offer consumers key legal protections and rights similar to those of traditional credit cards.
These rights include the ability to dispute charges and request refunds from the lender after returning products purchased with BNPL loans. The CFPB began investigating the rapidly growing BNPL market over two years ago and continues to receive consumer complaints about refunds and disputed transactions. This action aims to bring consistency to the BNPL market.
“When consumers check out and choose Buy Now, Pay Later, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised,” said CFPB Director Rohit Chopra. “Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”
The Buy Now, Pay Later (BNPL) market has seen rapid growth in recent years. Lenders promote the option of purchasing items through four easy payments. These products are marketed as a way to help consumers afford costly products and services over time without incurring interest. Currently, BNPL options are available for both products, such as televisions and gaming systems, and services, like airline tickets and cruises. BNPL products are widely popular among people of all ages, races, and income levels.
The commission shares they began examining the Buy Now, Pay Later (BNPL) industry in 2021 and found that BNPL is often used as a close alternative to conventional credit cards for purchasing goods and services. At checkout, both online and in physical stores, BNPL is frequently offered alongside credit card payment options. Similar to credit cards, which can be used in various situations beyond just in-person swipes or taps, BNPL products are utilized through digital user accounts linked to websites, mobile apps, browser extensions, or integrations with merchant platforms. The commission arrived at the conclusion that BNPL, like traditional credit cards, combines payment processing and credit services and charges transaction fees to merchants.
Since Buy Now, Pay Later (BNPL) lenders typically meet the criteria set by existing laws and regulations for traditional credit card providers, they must offer many of the same rights and protections. Notably, these include the rights to dispute charges and request refunds. A CFPB market report revealed that over 13% of BNPL transactions involve a return or dispute. In 2021, consumers disputed or returned $1.8 billion in transactions at the five firms surveyed. Without proper dispute protections, consumers can face significant challenges when returning merchandise or dealing with other billing issues the commission explains.
Today’s press release gives the interpretive rule explaining how Buy Now, Pay Later lenders meet the criteria for credit card providers, under the Truth in Lending Act. For consumers, this means Buy Now, Pay Later lenders must:
Investigate disputes: Buy Now, Pay Later lenders must investigate disputes that consumers initiate. Lenders must also pause payment requirements during the investigation and sometimes must issue credits.
Refund returned products or cancelled services: When consumers return products or cancel services for a refund, Buy Now, Pay Later lenders must credit the refunds to consumers’ accounts.
Provide billing statements: Consumers must receive periodic billing statements like the ones received for classic credit card accounts.
In 2021, the CFPB initiated an inquiry into the Buy Now, Pay Later (BNPL) industry, focusing on debt accumulation, regulatory gaps, and data harvesting. The agency published its findings in 2022, highlighting the industry's rapid growth and increasing consumer risks. Last year, the CFPB shared insights into the financial profiles of BNPL borrowers. Readers can get access to the interpretive rule via this link, "Truth in Lending (Regulation Z); Use of Digital User Accounts to Access Buy Now, Pay Later Loans."
If you or any one has an issue you believe is unresolved pertaining to the rule stated above, the CFPB encourages the public to submit comments on the interpretive rule. Given the rapid changes in this market, public feedback will help the CFPB determine where additional clarity is needed, potentially through further rules and guidance related to the BNPL market. Comments will be accepted until August 1, 2024.
THANK YOU FOR YOUR TIME
DISCLAIMER
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of The Steven Wick Blog. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.
If you decide to purchase any item using our authorized referral/affiliate links, be aware, we may receive a portion of the sales as commission, i.e. if you purchase a product/service.
To shop, select or click buttons, links or images, you will be redirected to product pages. Please, carefully research before you purchase. Feel free to share and leave a comment, we would love to hear from you. Your feedback is very important to us.
For more like this, music, literature, news, fashion, savvy political commentary, and fascinating features, sign up for the Steven Wick News Letter.
We here at the Steven Wick Blog are so proud of our work, we’d like to thank you for being a part of our community. However, our mission to share so much from music, literature, lifestyle to fashion is a 24/7 undertaking! We need your help to continue our work. Your financial donation will help us not only keep the lights on, but enable us run many more stories in the future to come. DONATE HERE
Message Of Gratitude
We deeply appreciate your contribution in making our blog the top brand among customers.
Without you as our readers, we wouldn't have achieved this level of success. Your satisfaction is our utmost priority, and we assure you that we will always be a reliable source for your entertainment needs.
Your trust in us is invaluable, and we are grateful for your generous donations as our readers.
A number of you took an extra effort and opted to contribute as monthly donors. By doing so, your generous contribution is multiplied by twelve throughout the year, thereby amplifying the impact you have on our work. Your dedication truly makes a significant change, and we sincerely appreciate your valuable support.
Your support has been instrumental in our brand's success.
Thank you for being with us throughout the past year.
As we continue to grow and enhance our business, we pledge to prioritize your needs and interests.
Best Regards
The Steven Wick Team
Comments