Buy now, pay later: Difference between revisions

The prevalence of Buy Now, Pay Later loans has been most notable since the COVID pandemic in 2020, a time where people had done a lot of shopping online at home<ref name=":1" />. Because of this recent time-frame, legislation has been slow to mitigate the widespread effects. Most countries simply tacked BNPL services onto pre-existing banking laws<ref name=":2">{{Cite web |last=Pearson |first=Daniel B. |date=6 Jun 2025 |title=New York Enacts First-of-Its-Kind Law to License Buy-Now-Pay-Later Lenders |url=https://www.mayerbrown.com/en/insights/publications/2025/06/new-york-enacts-first-of-its-kind-law-to-license-buy-now-pay-later-lenders}}</ref>{{Citation needed}}, but this has left many gaps in how the service is regulated.

The Consumer Financial Protection Bureau (CFPB) is a government agency designed for consumer protection from financial institutions. The agency first opened an inquiry into BNPL lenders in 2021, and it issued orders to collect information from Affirm, Afterpay, Klarna, PayPal, and Zip due to concerns of "accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology"<ref name=":1">{{Cite web |date=16 Dec 2021 |title=Consumer Financial Protection Bureau Opens Inquiry into “Buy Now, Pay Later” Credit |url=https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-opens-inquiry-into-buy-now-pay-later-credit/ |website=Consumer Financial Protection Bureau}}</ref>. In May of 2024, the agency issued an interpretative rule stating that Buy Now, Pay Later lenders are, in fact, credit card providers and are therefore subjected to the same federal regulations and consumer protections, particularly the Truth in Lending Act (TILA)<ref>{{Cite web |date=22 May 2024 |title=CFPB Takes Action to Ensure Consumers Can Dispute Charges and Obtain Refunds on Buy Now, Pay Later Loans |url=https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-to-ensure-consumers-can-dispute-charges-and-obtain-refunds-on-buy-now-pay-later-loans/ |website=Consumer Financial Protection Bureau}}</ref>.

However, in March of 2025, the bureau rescinded their interpretative rule after the Financial Technology Association (FTA), a lobbying organization for fintech companies, filed a complaint against the bureau for its interpretative rule, as well as after the bureau itself fell under new leadership within the Trump administration<ref name=":0">{{Cite web |last=Mitzenmacher |first=Eric T. |date=29 Mar 2025 |title=CFPB Indicates That It Will Rescind Buy Now, Pay Later Interpretative Rule |url=https://www.cfsreview.com/2025/03/cfpb-indicates-that-it-will-rescind-buy-now-pay-later-interpretative-rule/ |website=Mayer Brown - Consumer Financial Services Review}}</ref>. The FTA's complaint was filed less than six months after the bureau's interpretive rule<ref name=":0" /><ref>{{Cite web |date=Oct 2024 |title=Financial Technology Association v. Consumer Financial Protection Bureau |url=https://www.ftassociation.org/wp-content/uploads/2024/10/FTA-Complaint-File.pdf}}</ref>, and in the complaint, the FTA alleges that the bureau did not follow correct protocol, contradicted the Truth in Lending Act, and argued that credit card regulation was "a poor fit for BNPL products"<ref name=":0" />.

On May 9, 2025, New York included in their budget legislation (Senate Bill 3008) the ''Buy-Now-Pay-Later Act'' (Article 14-B) to regulate BNPL lenders by requiring state licensure and other regulations<ref name=":2" /><ref>{{Cite web |last=Cover |first=Jason |date=29 May 2025 |title=Understanding New York’s New Buy-Now-Pay-Later Law |url=https://www.consumerfinancialserviceslawmonitor.com/2025/05/understanding-new-yorks-new-buy-now-pay-later-law/ |website=Consumer Financial Services - Law Monitor}}</ref><ref>{{Cite web |date=Jan 2025 |title=Senate Bill S3008C |url=https://www.nysenate.gov/legislation/bills/2025/S3008/amendment/C |website=The New York State Senate}}</ref>.