An interpretive rule that defines lenders who provide buy now, pay later products as credit card providers under the Truth in Lending Act should have gone through the statutorily required public notice and comment process for new regulations, the American Bankers Association and U.S. Chamber of Commerce said in recent joint comments.
The Consumer Financial Protection Bureau issued the interpretive rule in May, alleging that its decision to regulate BNPL products as credit card products was consistent with Regulation Z, which implements the Truth in Lending Act.
In their comments, ABA and the U.S. Chamber’s Center to Capital Markets Competitiveness said they welcome additional transparency and regulatory clarity around BNPL products. However, they objected to the CFPB using an interpretive rule to grant itself the authority to regulate BNPL, as the process allowed little public input before the rule took effect in late July. They instead urged the CFPB to withdraw the interpretive rule and resubmit it as notice of proposed rulemaking, which would subject the rule to a more robust process of public notice and comment.
“Further, the interpretive rule is likely to increase uncertainty around BNPL products,” ABA and the U.S. Chamber said. “In particular, the CFPB does not define key terms necessary for understanding the interpretive rule’s scope, including what accounts may be considered a ‘digital user account.’ The CFPB also does not fully explain the reasoning behind the rule or its potential impacts.” The business groups also urged the bureau to extend the effective date of the rule to give BNPL providers more time to comply.
