Washington, D.C. – Today, nearly 100 consumer advocacy, civil rights and community organizations and academics submitted a supportive comment on the Consumer Financial Protection Bureau’s (CFPB) Buy Now, Pay Later (BNPL) Interpretive Rule.
These groups strongly support the CFPB’s proposal, which simply clarifies that accounts used to access BNPL credit are credit cards that must comply with credit card rules governing disputes, errors, periodic statements and disclosures. Those protections will enhance the safety of BNPL credit and make it easier for consumers to manage their finances.
In their comment, available here, the groups urged the CFPB to go further to require BNPL providers to comply with other protections required for credit cards, including assessments of borrowers’ ability to repay and reasonable and proportional penalty fees. Without such protections, consumers still face the risk of becoming over-indebted and paying costly fees on credit that is supposedly free. Low-income and financially vulnerable consumers, women, Black, and Latine consumers are especially likely to make purchases using BNPL.
“The CFPB’s proposal is a critical first step, but the agency must go further and require BNPL providers to comply with the same rules and consumer protections that are required for credit cards,” said Amanda Jackson, director of consumer campaigns at Americans for Financial Reform Education Fund.
“Buy Now, Pay Later accounts are a form of credit card because they can be used for purchases at the point-of-sale,” said Lauren Saunders, associate director of the National Consumer Law Center. “BNPL users need the same clear fee disclosures, dispute rights, and other protections required for traditional credit cards.”
“Of course BNPL services are credit cards and BNPL lenders are card issuers,” said Adam Rust, director of financial services for the Consumer Federation of America. “Consumers use BNPL in the same places and for the same purposes as traditional credit cards, and they deserve similar protections. We applaud the CFPB for setting the record straight by closing this loophole.”
“Using buy-now-pay-later comes with serious risks, and this proposal helps protect people from the hidden financial costs and risks of using buy-now-pay-later products to make purchases. Lower-income and financially vulnerable people — who are disproportionately women, Black, and Latine — can get into unexpected financial trouble using BNPL that can be one-click credit traps,” said Christine Zinner, senior policy counsel at Americans for Financial Reform Education Fund.
“Recent research has consistently shown that BNPL users tend to be more financially vulnerable,” said Jennifer Chien, senior policy counsel at Consumer Reports. “We urge the CFPB to require BNPL providers to assess a borrower’s ability to repay just like credit card companies so that these consumers do not fall deeper into financial trouble when they take out these loans.”
“Thanks to the CFPB, clear fee disclosures will be required when consumers open BNPL accounts,” said Mike Litt, U.S. PIRG’s consumer campaign director. ”The CFPB should go even further and require fee disclosures in BNPL advertisements and solicitations, too.”
“The rapid growth of BNPL products necessitates clear guardrails to ensure consumers are both fully informed about what they can expect to pay for these services and have a clear path towards recourse for when issues arise. The CFPB’s proposed rule is a promising first step towards guaranteeing consumers and lenders can enter into these transactions safely and responsibly,” said Jane Doyle, senior regulatory policy associate at Woodstock Institute.