The Consumer Financial Protection Bureau will not penalize Buy Now, Pay Later companies for violations of interpretive rules it introduced earlier this year, pointing to the efforts those companies have made to fall in line, CFPB Director Rohit Chopra announced on Friday.
Back in May, the CFPB announced that Buy Now, Pay Later companies must provide consumers with the same legal rights and protections that credit card lenders do. That included allowing consumers to demand refunds and dispute transactions. The CFPB indicated that more than 13% of BNPL transactions involved a return or dispute, and, $1.8 billion worth of transactions at five companies were either refunded or disputed.
The CFPB opened a comment period after releasing its rule, and many BNPL providers jumped at the chance to differentiate their product from credit cards. “While Affirm supports the adoption of consistent BNPL regulation by the Bureau, Affirm asserts consumers and the BNPL industry would be better served by BNPL-specific regulations designed for how consumers use BNPL products,” wrote Affirm, one of the largest BNPL providers, in its comment to the CFPB. “Requiring BNPL providers to comply with rules designed for open-end credit cards creates compliance challenges and confusing outcomes for consumers.”
At the same time, Republicans in the House of Representatives started the process of repealing the rule using the Congressional Review Act.
Overall, BNPL companies responded “favorably and constructively,” Chopra said in a blog post published on the CFPB’s website. Given that many companies “are working diligently and in good faith to come into compliance,” the CFPB decided not to seek penalties for violations of the rule, and expected that other state and federal regulators would follow the CFPB’s lead. The CFPB is also planning on releasing a set of Frequently Asked Questions next month to help BNPL companies understand what is expected of them going forward.
