CFPB says BNPL firms must comply with credit card consumer protection rules for billing disputes and refunds
The US Consumer Financial Protection Bureau (CFPB) has designated buy now, pay later (BNPL) firms as credit card providers, and has ruled that the sector must comply with some of the same consumer protection rules.
CFPB rules that BNPL lenders are credit card providers
Its latest interpretive rule, issued this week following a three-year inquiry, requires BNPL firms to enable consumers to dispute charges and request refunds for transactions completed through BNPL loans.
“Because BNPL lenders will typically meet criteria under existing law and regulation as traditional credit card providers, they need to extend many of the same rights and protections as classic credit card providers,” the ruling reads.
The regulator’s corresponding market report, published in September 2022, puts forward that “more than 13%” of BNPL transactions incur a product return or payment dispute, and as a result, a failure to provide the necessary protections could “create chaos” for consumers engaged in the process.
With this, it has said BNPL firms must satisfy three new requirements. These include investigating disputes instigated by consumers, with payment requirements paused during the investigation phase; providing refunds when BNPL-funded products are returned; and issuing periodic billing statement to consumers “like the ones received for classic credit card accounts”.
The CFPB says it “encourages the public to submit comments” regarding its latest ruling, which it is to accept until 1 August 2024.
Commenting on the decision, Rohit Chopra, director of the CFPB, cites “overextension and excessive debt accumulation” as some of the wide-ranging problem areas that currently vex BNPL consumers.
He states that “any mechanism, tool, or procedure that consumers can use from time to time to buy goods or services on credit gets the protections that consumers have come to know and expect with credit cards”, and that by issuing its latest ruling, the CFPB hopes to “make clear how the agency would apply longstanding law and regulation to this popular form of credit”.
