The Consumer Financial Protection Bureau today issued an interpretive rule to define lenders who provide buy now, pay later products as credit card providers under the Truth in Lending Act. As a result, BNPL lenders will be required to provide consumers with options currently available to credit card holders, such as the ability to dispute merchant charges through the creditor.
In a statement, CFPB said the BNPL industry has expanded rapidly in recent years. (A Federal Reserve survey released Tuesday found that 14% of U.S. adults last year said they had used a BNPL product in the past 12 months.) Like conventional credit cards, BNPL combines payment processing and credit services, while charging transaction fees to merchants, the bureau said. “Because BNPL lenders will typically meet criteria under existing law and regulation as traditional credit card providers, they need to extend many of the same rights and protections as classic credit card providers.”
As a result of the interpretive rule, BNPL lenders must investigate disputes that consumers initiate, refund returned products or canceled services, and provide billing statements, according to the CFPB. The bureau added that it is accepting public comments on the rule through Aug. 1.