The Financial Technology Association (FTA) has filed a lawsuit against the Consumer Financial Protection Bureau and its Director, Rohit Chopra, in the District Court for the District of Columbia. The dispute centers around the CFPB’s “Buy Now, Pay Later” (BNPL) rule, which, the FTA argues, the Bureau overstepped its authority in enacting and did not follow the proper procedure for creating the regulation.
The rule treats BNPL digital accounts as “credit cards” under the Truth in Lending Act (TILA) and Regulation Z, imposing additional disclosure requirements on BNPL providers. FTA contends that these requirements are burdensome, inappropriate, and exceed the scope of the CFPB’s authority, given that BNPL products differ significantly from traditional credit cards.
The FTA’s lawsuit alleges several violations of the Administrative Procedure Act (APA) and TILA:
- The FTA argues that the CFPB improperly labeled the new rule as “interpretive,” bypassing the required notice-and-comment rulemaking process.
- The complaint claims that the CFPB overstepped its authority by expanding the definition of “credit card” beyond what Congress intended and imposing obligations on BNPL providers that TILA does not permit.
- The FTA contends that the CFPB failed to consider how poorly suited some of the new disclosure obligations are for BNPL products and did not provide sufficient time for compliance.
- The lawsuit alleges that the CFPB based its rule on an improper understanding of existing law and regulations.
- The FTA argues that the CFPB ignored TILA’s mandate that new disclosure requirements must have an effective date of October 1 following at least six months after promulgation.
“Unfortunately, the CFPB’s rushed interpretive rule falls short on multiple counts, oversteps legal bounds, and risks creating confusion for consumers,” said Penny Lee, the chief executive of the FTA. “The CFPB is seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without adhering to required rulemaking procedures, in excess of its statutory authority, and in an unreasonable manner. We believe the CFPB’s attempt to impose regulations designed for credit cards on the pay-in-four products offered by many of our members shows an underlying misunderstanding of BNPL.”
