The CFPB will not make enforcement of its Buy Now, Pay Later rule a priority, according to a recent statement.
"The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans," CFPB officials said in a statement. "The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses. The Bureau is further contemplating taking appropriate action to rescind [the] Buy Now, Pay Later [rule]."
The Bureau went further in a status report and joint motion to stay that it submitted in March in a suit filed by the Financial Technology Association (FTA) challenging the rule, specifically saying that it "is planning to revoke" the interpretive rule. As a result, Judge Ana Reyes of the U.S. District Court of the District of Columbia issued a stay in April and required a joint status report by June 2.
The action contemplated by the CFPB is the one of the many moves by the Trump Administration to undo Biden Administration regulatory actions.
The interpretive rule was issued in May 2024, and became effective July 30, 2024. It provides that the "digital user accounts" that are a hallmark of certain BNPL programs are "credit cards," making the BNPL providers "card issuers."
Based on the interpretive rule, many BNPL providers would be subject to many of Regulation Z's open-end credit provisions. These Regulation Z requirements include account-opening disclosures, billing statements, changes in terms disclosure, payment processing, treatment of credit balances, issuance of cards, liability for unauthorized use, merchant disputes, billing disputes, crediting of returns, advertising, and, as the CFPB noted in a footnote, potentially application and solicitation disclosures.
The FTA filed suit in the district court in October, contending that the interpretive rule actually was a legislative rule, and that under the Administrative Procedure Act the agency was required to go through the notice and comment period. An interpretive rule does not require a notice and comment period.
The FTA also alleged that the new rule exceeds the CFPB's statutory authority by imposing obligations beyond those permitted by TILA and by contravening TILA's effective-date requirement for new disclosure requirements.
Finally, the FTA has argued that the interpretive rule was arbitrary and capricious under the Administrative Procedure Act because the CFPB overlooked that certain December 2023 TILA requirements with respect to credit cards are a poor fit for BNPL products and because the CFPB did not give BNPL providers sufficient time to come into compliance.
Democrats have long urged the CFPB to focus on BNPL. In December 2023, then- Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, and Democratic committee members Raphael Warnock of Georgia and John Fetterman of Pennsylvania sent a letter to then bureau Director Rohit Chopra urging the CFPB to "continue focusing on" BNPL products to ensure they do not "become a method to take advantage of struggling consumers."
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