WASHINGTON, D.C., – The Center for Responsible Lending (CRL) urged the Consumer Financial Protection Bureau (CFPB) to implement more robust protections for Buy Now Pay Later (BNPL) digital user accounts in a comment letter submitted yesterday evening. The letter was issued in response to the Bureau’s call for public input on an interpretive rule for BNPL lenders published in May.
In its interpretive rule, the CFPB affirmed that BNPL products are credit and are covered by certain parts of the Truth in Lending Act. The interpretive rule did not assess whether BNPL providers should also be required to comply with other protections required for credit cards, including the requirement to assess ability to repay and limit late fees to reasonable and proportional amounts.
“We commend the CFPB’s efforts to remind BNPL issuers that their products are, in fact, credit cards, subject to certain disclosures, billing statements and dispute resolution protections. Yet, there is more work to be done. To protect consumers from potential abuse, BNPL providers should also be required to assess a borrower’s ability to repay before issuing credit, and limit late fees to reasonable amounts,” said Nadine Chabrier, litigation and policy counsel at CRL. “The CFPB, which has the authority to impose these requirements under the Truth in Lending Act and the CARD Act, should do so in order to eliminate potential abuses in the industry that disproportionately impact low-income, younger, and Black and Latino borrowers, who are more likely to use BNPL products.”
“CFPB should adopt an ability to repay standard because there is evidence of borrower overextension and decreased financial health after using BNPL,” stated CRL’s comment letter. “Finally, the Bureau should require creditors to assess reasonable and proportional late fees given a wide range of practices among creditors, some of which are costly.”
CRL also signed a coalition letter of nearly 100 consumer, civil rights and community organizations and academics supporting the CFPB’s conclusion that accounts used to access BNPL credit must comply with credit card rules. Additionally, the coalition letter urged the Bureau to strengthen its current proposal.
Additional Background
- The CFPB’s interpretive rule is scheduled to go into effect 60 days after publication in the Federal Register.
- Buy Now Pay Later Rule is a Step Forward for Consumer Protection
- New CRL Video Explains Why ‘Buy Now Pay Later’ Market Should Be Subject to Consumer Protections
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Press Contact: Vincenza Previte vincenza.previte@responsiblelending.org