The US Consumer Financial Protection Bureau (CFPB) has determined that buy now, pay later (BNPL) lenders should be regulated similarly to credit card companies.
This interpretive ruling mandates that BNPL lenders provide consumers with essential legal protections and rights akin to those associated with traditional credit cards. Key protections include the right to dispute charges and secure refunds after returning products purchased with BNPL loans.
The CFPB’s examination of the rapidly growing BNPL sector began over two years ago and continues to receive consumer complaints regarding refunds and disputes. A market report from the bureau revealed that more than 13% of BNPL transactions involved returns or disputes. In 2021 alone, customers disputed or returned $1.8 billion in transactions with the five companies surveyed.
CFPB Director Rohit Chopra emphasized that, like standard credit cards, BNPL services combine payment processing and credit offerings while charging merchants transaction fees, warranting comparable regulatory treatment. He stated, “When consumers check out and choose buy now, pay later, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised. Regardless of whether a shopper swipes a credit card or uses buy now, pay later, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”
As a result of this ruling, BNPL lenders are now required to investigate disputes, issue refunds for returned products or canceled services, and provide periodic billing statements similar to those provided for traditional credit card accounts.
The CFPB is seeking public comments on these findings, with a submission deadline set for August 1.