The CFPB is investigating PayPal’s Bill Me Later unit. The issue is whether Bill Me Later is bypassing state laws concerning consumer lending, including interest rate caps, by using a bank that is not subject to state rules.
A Bloomberg article, which reports the investigation, says that Bill Me Later relies on a Comenity Capital Bank, which is based in Utah. Comenity creates loans, which are then administered by Bill Me Later for its customers.
The CFPB investigation is one of many being pursued by the new agency, created by the Dodd-Frank Act, involving the providers of consumer financial services. Their probes have already resulted in significant settlements with major players such as American Express, Discover, and Capital One.
Earlier this year, Mark Lavelle, one of the founders of Bill Me Later and now a PayPal executive commented that Bill Me Later “probably couldn’t get off the ground today” because of increased regulatory scrutiny applied to lenders. The absence of competitors “is good for my company now, but I don’t think it’s necessarily good for our economy,” Lavelle told analysts.
To learn more about the Bill Me Later loan probe, read the full report here.
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