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CFPB Says BNPL Must Provide Consumer Protections Offered by Credit Cards


The Consumer Financial Protection Bureau (CFPB) ruled Wednesday (May 22) that buy now, pay later (BNPL) vendors are credit card providers and must provide some key legal protections and rights delivered by conventional credit cards.

That includes, for example, the consumer’s right to dispute charges and demand a refund from the lender, the agency said in a Wednesday press release.

“Regardless of whether a shopper swipes a credit card or uses buy now, pay later, they are entitled to important consumer protections under longstanding laws and regulations already on the books,” CFPB Director Rohit Chopra said in the release.

The interpretive rule released Wednesday by the CFPB says BNPL lenders must investigate disputes initiated by consumers, pause payment requirements during the investigation, credit refunds to consumers’ accounts when they return products or cancel services, and provide periodic billing statements like those traditionally delivered by conventional credit card accounts, according to the release.

The CFPB is accepting comments about the interpretive rule and may make clarifications or revisions to it if needed, Chopra said in prepared remarks released Wednesday.

“Buy now, pay later is now a major part of the consumer credit market, as these loans provide a meaningful alternative to other options for consumers,” Chopra said in his remarks. “However, the CFPB wants to ensure that these new competitive offerings are not gaining an advantage by sidestepping the longstanding rights and responsibilities enshrined under the law.”

In a response to this interpretive ruling posted to its website Wednesday, BNPL provider Klarna said that its initial reading of the rule found that it does not require any major changes to the company’s business.

Klarna added that it has long called for “bespoke, proportionate” BNPL regulation but that the CFPB’s fails to acknowledge “fundamental differences” between BNPL and credit cards.

“It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways,” Klarna said in its statement.

“Klarna’s BNPL is short-term, no interest credit with no fees when paid on time,” the company added. “At Klarna, we underwrite every transaction to ensure we only lend to consumers who can pay us back, proven by our global defaults of 1%. This model provides consumers with a transparent and predictable repayment structure, making it easier to manage their finances without the burden of accumulating interest.”

PYMNTS Intelligence has found that despite concerns on the part of regulators, BNPL resonates with shoppers, especially younger ones. Half of U.S. consumers between ages 25 and 44 have used BNPL at least once, according to “Beyond the Headlines: Understanding BNPL’s Impact on Consumers,” a PYMNTS Intelligence and Sezzle collaboration.