The Consumer Financial Protection Bureau (CFPB) is poised to reverse its previous stance by dropping an interpretive rule that classified pay-in-four Buy Now, Pay Later (BNPL) lenders similarly to credit card providers.
In October, the Financial Technology Association (FTA) filed a lawsuit challenging this BNPL rule. Recently, both the CFPB and the FTA have sought to stay the case, acknowledging the CFPB’s intention to revoke the interpretive rule, which effectively addresses the concerns raised in the litigation.
The CFPB’s initial rule would have required BNPL providers to offer consumers certain legal protections and rights akin to those associated with traditional credit cards. These protections would include the right to dispute charges and seek refunds from lenders after returning products purchased with BNPL loans.
When filing the lawsuit, the FTA argued that the rule exceeded legal boundaries and could lead to consumer confusion. CEO Penny Lee stated, “The CFPB is seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without adhering to required rulemaking procedures, in excess of its statutory authority, and in an unreasonable manner.”
The CFPB has been active in redefining its directives since President Donald Trump dismissed director Rohit Chopra shortly after assuming office. Under acting Director Russell Vought, the bureau has scaled back its efforts, including withdrawing several lawsuits, such as those against JPMorgan Chase, Bank of America, and Wells Fargo regarding fraud on the Zelle P2P payments network.
Additionally, the US Senate recently voted to eliminate a rule that would have granted the CFPB oversight over major technology companies like Apple, Google, and X, which provide digital payment apps and wallets.