The Consumer Bankers Association (CBA) and Bank Policy Institute are calling on the Consumer Financial Protection Bureau (CFPB) to rescind a rule that would regulate buy-now-pay-later providers.
Buy-now-pay-later, or BNPL, providers are fintechs that allow consumers to make installment payments on items at the point of purchase.
The CFPB interpretive rule, released in May, establishes new requirements for BNPL issuers based on requirements under the Truth in Lending Act. These include what to do when a customer requests a refund, how to investigate transaction disputes, and how consumers can access their billing statements, among others.
While the CBA and Bank Policy Institute support much of the substance of the rule, they argue that the rule has procedural shortcomings and violates the Administrative Procedure Act (APA).
“If the CFPB is responsible for enforcing the law, it should also be responsible for following it,” CBA and BPI officials said in a letter to the CFPB. “We share the same goal as the CFPB: consumers that elect to use BNPL must be protected. A rulemaking process will help lead to a more informed rule that will ultimately help the CFPB best protect consumers.”
The groups are calling on the CFPB to rescind the rule, adhere to the law, and submit a formal rule through the rulemaking process, providing an opportunity for the public comments.
They also offered some suggestions on how to improve the rule. Specifically, they said that it should hold all BNPL issuers to the same standards; better define and differentiate BNPL products and users from other credit products already covered by consumer protection laws; and supervise the activities of nonbank BNPL providers under the CFPB’s larger participant rulemaking authority.