RSSThe Consumer Financial Protection Bureau recently confirmed it intends to treat ‘buy now, pay later’ lenders as credit card providers by issuing an interpretive rule under which they must provide similar legal provisions, including the right to dispute charges and demand a refund from the lender after returning a product acquired with a BNPL loan.
BNPL lenders must investigate consumer disputes, including pausing payment requirements during the investigation. Consumers must also receive regular billing statements. Thirteen percent of BNPL transactions included a return or dispute, according to a CFPB report from 2022. In 2021, customers returned or disputed $1.8 billion in transactions at the five firms the bureau surveyed.
“When consumers check out and choose BNPL, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised,” said CFPB Director Rohit Chopra. “Regardless of whether a shopper swipes a credit card or uses BNPL, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”
The CFPB started studying debt accumulation, regulatory arbitrage and data harvesting in the BNPL industry in 2021, finding the service is often used as a substitute for conventional credit cards to purchase goods and services. The following year, the CFPB published its results, highlighting the rapid growth of the industry and growing consumer risks. In 2023, the CFPB published its findings on the financial profiles of BNPL borrowers.
In a written statement following the announcement, major BNPL provider Klarna said the CFPB “fails to acknowledge the fundamental differences between BNPL and credit cards in their guidance and this announcement does nothing to address the $1.15 trillion in credit card debt.”
The new rule will go into effect 60 days after publication in the Federal Register, and the agency is accepting public comments until Aug. 1.
