Washington, D.C. –The Consumer Federation of America released the following statement in response to the interpretive rule from the Consumer Financial Protection Bureau (CFPB) classifying buy now pay later lenders as credit card providers:

[The interpretive rule says that BNPL are card issuers because their accounts are credit cards under Regulation Z (Truth in Lending Act). Accordingly, it makes BNLP lenders subject to dispute resolution and refund protections consistent with those for credit card issuers and requires them to provide account holders with periodic statements.]

“The CFPB has closed a regulatory loophole that permitted BNPL lenders to evade important consumer protection rules,” said Adam Rust, Director of Financial Services for the Consumer Federation of America. “By stating clearly that BNPL lenders are card issuers, and their accounts are credit cards, the CFPB has ensured that when consumers want to contest a charge or seek a refund, it will not matter if they used a BNPL loan or a credit card. Similarly, in requiring BNPL lenders to provide a periodic statement, the CFPB is holding the industry accountable to the same standards as credit card issuers for providing timely and complete account information to consumers.

Nonetheless, the rule will not address all of the issues presented by the proliferation of these products. A high share of BNPL users are financially distressed. Compared to consumers who do not use BNPL, they are disproportionately more likely to have maxed their credit card limits, been delinquent on a debt, or used a high-cost payday lender. We call on the CFPB to hold BNPL lenders accountable for underwriting for an ability to repay and to ensure that BNPL penalty fees are reasonable and proportionate to cost.”

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In 2022, CFA and 76 other consumer, housing, civil rights, legal services, faith, community, small business, student borrower, and public interest groups submitted joint comments to the CFPB on the need for regulatory action to address buy-now-pay-later credit products.