CFPB Announces Plans to Regulate BNPL Market

The Consumer Financial Protection Bureau yesterday announced plans to increase its oversight of the Buy Now, Pay Later industry, by issuing guidance or a rule that will more closely align the product with its credit card cousins, and by instituting supervisory examinations of BNPL providers.

Use of BNPL products — which allow consumers to make four installment payments on items, customarily purchased online — has increased tenfold in the past two years, according to the CFPB. Accordingly, delinquency and charge-off rates on BNPL products are also increasing and show continued signs of an “upward trend,” CFPB Director Rohit Chopra said yesterday during remarks outlining the highlights of a report the Bureau issued on BNPL and the steps that it is taking to regulate the market.

  • Since the product looks like a credit card and acts like a credit card, the CFPB is going to start treating it like a credit card. But as an unregulated market, BNPL are not required to offer the same protections that credit card lenders are.
  • BNPL companies also have more access to data than credit card lenders, allowing them to create digital profiles of consumers and monetize that data in ways that “may threaten consumers’ privacy security, and autonomy,” the CFPB said.

What This Means: Some companies in the accounts receivable management industry are starting to receive placements from BNPL providers looking to collect on unpaid debts. As the product continues to grow and mature, it’s likely that BNPL will become another type of debt that collectors will be able to tap into.

The Last Word: “We look forward to continuing working with regulators like the CFPB to advance positive consumer outcomes,” said Penny Lee, the chief executive of the Financial Technology Association, a trade group representing BNPL providers.

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