- within Cannabis & Hemp topic(s)
On February 23, New York Governor Kathy Hochul announced that the NYDFS published proposed rules to implement New York's new Buy Now, Pay Later (BNPL) oversight framework established under the New York Banking Law. The proposal would create a comprehensive licensing and supervisory regime for BNPL providers operating in the state and introduce detailed consumer-protection standards governing disclosures, fees, disputes, and data practices.
The proposed framework would apply broadly to entities that "offer" BNPL loans to New York consumers, including certain platform providers and purchasers of BNPL receivables, subject to enumerated exemptions. It contemplates separate authorization for interest-free and interest-bearing BNPL products, along with examination, reporting, and change-of-control requirements similar to other state-licensed lending regimes.
Key components of the proposal include:
- Licensing and public-facing transparency. Covered BNPL providers would be required to obtain authorization from the NYDFS and clearly display licensing status across websites, mobile applications, and consumer agreements.
- Fee limitations and payment rules. The proposal would cap penalty fees, restrict cumulative fee outcomes, prohibit certain payment-method charges, and require that consumers be permitted to prepay without additional cost. Interest-bearing BNPL loans would be subject to New York's usury caps and late fees would generally be limited to $8 unless an exception is granted.
- Enhanced disclosures and periodic statements. BNPL lenders would be required to provide TILA-like disclosures and periodic billing statements, with timing requirements tied to late-fee treatment.
- Ability to Pay Underwriting. The proposal would require BNPL providers to analyze a consumer's income and indebtedness with "reasonable risk-based underwriting" before issuing a loan.
- Affirmative-consent data privacy regime. Uses of consumer data beyond servicing the requested BNPL transaction would require clear, opt-in consent, with renewal and deletion requirements.
Public comment on the proposed rules will be due within 60 days of their formal publication in New York's State Register.
Putting It Into Practice: New York continues to position itself at the forefront of state-level consumer finance regulation (previously discussed here and here). BNPL providers, platform operators, and funding partners should assess whether their offerings fall within the proposal's scope, review fee structures and underwriting processes, and submit comments as necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
