Oregon Says BNPL Providers Need State Lending Licenses

Oregon is reminding pay later companies they must have state lending licenses before offering their services.

The proposed bulletin from the Oregon Department of Consumer and Business Services, Division of Financial Regulation (DFR) was issued earlier this month, and is the subject of a Tuesday (July 28) article from law firm Ballard Spahr.

The bulletin is worth noting because it rejects arguments buy now, pay later (BNPL) providers have used in other jurisdictions on the applicability of state lending laws, the attorneys write.

“According to the DFR, licensing obligations apply regardless of whether the BNPL product is described as a nonrecourse loan or does not impose interest, fees, or other charges at the time of the initial purchase,” the article said.

The bulletin says that the applicable licensing requirement depends chiefly on the repayment term of the BNPL product. Loans of $50,000 or less with repayment terms of 60 days or less, or loans payable on demand within 60 days fall under Oregon’s Payday Loan Law.

BNPL loans or lines of credit with periodic payments extending past 60 days are covered by Oregon’s Consumer Finance Act.

“In both cases, the licensing requirement extends beyond the lender itself to include persons acting as agents, brokers, or facilitators,” the attorneys wrote.

“Because Oregon’s lending statutes do not define the term ‘loan,’ the DFR looks to dictionary definitions and Oregon case law. Relying on those authorities, the Bulletin concludes that a loan is simply an advance of money accompanied by an obligation to repay in the future.”

The DFR says that because BNPL products allow consumers to obtain goods immediately while paying back the obligation over time, pay later transactions meet the legal definition of a loan.

The DRF’s findings come at a time when BNPL has moved from serving as an alternative payment method to a force shaping how retailers present merchandise, guide purchase decisions and shepherd shoppers through the buying process.

It’s a shift that is becoming harder for retailers to ignore, with PYMNTS Intelligence/PayPal research showing that 43% of consumers abandon a purchase when BNPL is unavailable.

“If nearly half of prospective buyers are prepared to walk away because financing is missing, retailers must reconsider where flexible payment options appear within the customer journey rather than treating them as a final checkout feature,” PYMNTS wrote earlier this month.