21 Attorneys General Urged CFPB to Regulate BNPL


On March 25, the Consumer Financial Protection Bureau (CFPB) closed its request for comments regarding the inquiry on buy now, pay later (BNPL) that it launched in December. PYMNTS assessed the 44 public comments available on the government website, and the vast majority of them urged the CFPB to increase transparency and information disclosure requirements from BNPL firms.

The public comments available include a wide range of stakeholders, from individuals to consumer associations or trade associations.

Yet, the opinion that probably carries more weight is a letter submitted by 21 attorneys general (AGs) concerned about how “some BNPL products are designed to evade certain consumer protection laws.” The AGs urged the CFPB to analyze the BNPL market and to use its rulemaking powers to increase fee transparency, disclosure, credit reporting, dispute resolution mechanisms and the use of consumer data among other things.

The AGs’ submission contains most of the claims also suggested separately by other participants. None of the submissions, including that of the attorney generals, suggest that BNPL products should be forbidden. But the AGs go one step further than the rest and recommend the CFPB to use its rulemaking authority “to ensure BNPL providers are clearly and accurately disclosing all actual and potential fees and charges to consumers and, second, that any fees and charges are reasonable and proportional to the overall cost of the loan.”

This second request on the proportionality of the fees is one of the two references that we have found among all the submissions that directly address the adequacy of the fees. The second reference, from the National Association of Convenience Stores, just pointed at the “large fees” charged by BNPL. While these are just two references, the CFPB could take them into consideration given the Bureau’s agenda to look into any fees that could affect consumers. In this regard, the CFPB launched in January an inquiry into “junk fees,” credit card fees, overdraft fees and other fees.

Most of the comments from consumer associations and other financial or banking associations emphasized the need to extend the protections established in the Truth in Lending Act (TILA) to BNPL products and companies. In view of some respondents, TILA’s disclosures and protections, like comparison of credit terms and rates or dispute and chargeback rights, do not extend to BNPL products, and consumers would benefit from these extra protections.

Another common request is to compel BNPL firms to report positive repayment history and other data to credit agencies. This would help certain segments of the population to build credit profiles and it would also help BNPL providers to assess the underwiring risk of the borrower.

On the other side, there are three submissions, two from trade associations and one from a BNPL company, advocating for BNPL firms. These organizations suggest that despite BNPL being already subject to key consumer protection law and regulations, they are willing to work with the CFPB. The Electronic Transactions Associations said “if the CFPB adopts any new regulations governing BNPL products, they should be designed to fit within this established, robust, regulatory framework. New public policies for BNPL products should complement, and not conflict with, existing laws and regulations as well as private sector rules and practices.”

There is, however, an area of common understanding, the need to better inform consumers of their choices and the need to conduct additional research into the impact of the BNPL market on consumers.

The CFPB will probably analyze all the submissions as well as the data received from Affirm, Afterpay, Klarna, PayPal and Zip before taking any decision. While the Bureau’s next steps aren’t yet clear, in the initial letter sent to these companies in December, the CFPB left the door open for enforcement actions or new rules if necessary.

Read more: The CFPB and BNPL: 3 Things to Watch