Enforcement of last year’s interpretive rule on “buy now, pay later” loans will not be prioritized and could be rescinded in the future, the Consumer Financial Protection Bureau (CFPB), the bureau said Tuesday.
The CFPB’s interpretive rule, which became applicable last July, focuses on the applicability of subpart B of Regulation Z (Truth in Lending Act) to lenders that issue digital user accounts used to access credit, including those lenders that market loans as BNPL.
These lenders, the bureau said then, meet the criteria for being “card issuers” for purposes of Regulation Z, and they are also “creditors” subject to subpart B of Regulation Z – including those provisions governing periodic statements as well as credit card dispute and refund rights. It noted, however, that such lenders are generally not subject to the credit card regulations in subpart G, for example, provisions addressing penalty fee limits and ability-to-repay requirements.
In a summary with last year’s rule, the bureau noted that traditional BNPL products are closed-end loans payable in four or fewer installments without a finance charge, used to make purchases on credit. Consequently, BNPL loans are subject to some, but not all, of Regulation Z’s credit card regulations, it said.
The regulation specifically states that subpart B, while titled “Open-End Credit,” also applies to credit that is not open end if, as with BNPL, the credit is not subject to a finance charge and is not payable by written agreement in more than four installments.
Also deemed not priority material for enforcement recently by the bureau is its regulation on small business lending data collection; a rule requiring nonbanks subject to orders due to alleged violations of consumer financial protection laws to register with the bureau; and fines or penalties associated with the 2017 payday rule’s payment withdrawal and payment disclosure provisions.
CFPB Announcement Regarding Enforcement Actions Related to Buy Now, Pay Later Loans
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