In two more moves indicating its retrenchment and retreat from actions under its previous administration, the Consumer Financial Protection Bureau has announced its intentions to revoke one rule while also announcing it will not prioritize enforcement actions under another rule. Details below.
Buy Now, Pay Later Rule
The CFPB is taking steps to revoke its interpretive rule concerning Buy Now, Pay Later (BNPL) products. This rule, introduced in May 2024, sought to apply certain credit card protections to BNPL providers under the 1968 Truth in Lending Act (TILA). These protections included requiring BNPL providers to issue regular billing statements, investigate disputes, and offer refunds for returned products or canceled services.
However, the Financial Technology Association (FTA), which represents companies like Block Inc., Klarna Bank, PayPal, and Zip Co., filed a lawsuit in response to the rule. The FTA argued that the CFPB exceeded its authority by imposing credit card regulations on BNPL products — closed-end, no-interest loans that do not have the same financial structures as traditional credit cards. The FTA contends that the CFPB should have gone through a more formal process, such as notice and comment, to issue the rule as a legislative rule rather than as an interpretive rule.
In a joint filing with the CFPB, the FTA requested that the District Court for the District of Columbia grant a stay in the litigation while the agency works to revoke the rule. The CFPB has agreed to provide regular status updates on its progress toward revocation, with the next report due by June 2.
Small Dollar/Payday Lending Rule
In a related move, the CFPB has announced that it will not prioritize enforcement actions or penalties related to the Payment Withdrawal and Payment Disclosure provisions of the Payday, Vehicle Title, and Certain High-Cost Installment Loans Regulation when they became operative on March 30. This decision aims to refocus the Bureau’s resources on more pressing consumer protection issues, particularly those impacting military servicemembers, veterans, and small businesses.
The CFPB’s shift in focus reflects a growing concern about the impact of high-cost loans on vulnerable populations. The agency’s decision to ease enforcement on certain provisions may signal a broader reconsideration of its approach to payday lending, where the focus could shift to more targeted regulations. The Bureau has also indicated it may issue a notice of proposed rulemaking to narrow the scope of the rule in the future.
