The Financial Technology Association (FTA) has initiated a lawsuit against the Consumer Financial Protection Bureau (CFPB) regarding its recently announced buy now, pay later (BNPL) regulations.
Earlier this year, the CFPB issued an interpretive rule stating that pay-in-four BNPL lenders should be regulated similarly to credit card issuers. This rule requires providers to extend essential legal protections and rights to consumers that are typically associated with conventional credit cards. These protections include the right to dispute charges and request a refund from the lender after returning a product purchased with a BNPL loan.
FTA CEO Penny Lee expressed concerns, stating, “Unfortunately, the CFPB’s rushed interpretive rule falls short on multiple counts, oversteps legal bounds, and risks creating confusion for consumers. The CFPB is seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without adhering to required rulemaking procedures, exceeding its statutory authority, and in an unreasonable manner. We believe the CFPB’s attempt to impose regulations designed for credit cards on the pay-in-four products offered by many of our members demonstrates a misunderstanding of BNPL.”
Lee emphasized that the industry is open to regulation that “fits the unique characteristics” of the BNPL sector and is eager to collaborate with the CFPB on this matter.
BNPL leader Klarna described the CFPB rule as “baffling,” while another significant player, Affirm, expressed that it is “encouraged” by the new regulations.