The new leadership of the Consumer Financial Protection Bureau continued to unwind rules and debunk reports it had published and promulgated under previous leaderships, doing everything they can to distance themselves from what some argue is the Bureau’s primary mission. In its latest forays, the Bureau has published a report on consumers’ ability to repay Buy Now, Pay Later products, while also proposing to no longer allocate funds from its Civil Penalty Fund for consumer education and financial literacy, and proposed a delay in the enforcement of its small business lending rule.
📊 BNPL Study Finds Limited Harm, Sparks Ongoing Debate
The CFPB released a new working paper this month analyzing the effects of Buy Now, Pay Later (BNPL) services, finding no negative impact on consumers’ ability to repay non-BNPL debt.
- The study used data from six major BNPL providers and concluded that while BNPL usage increases temporarily after first use, it does not lead to increased financial distress or higher non-BNPL debt balances.
- The study contradicts a January 2025 CFPB report, published when Rohit Chopra was still leading the Bureau, which raised concerns about debt stacking, noting that 63% of BNPL users also held other loans, and 33% used multiple BNPL providers simultaneously.
- According to the June study, BNPL users repaid loans 98% of the time, which is far higher than the default rate for credit cards in the same period, which was at about 10%.
- Critics, including consumer advocacy groups, remain unconvinced. They argue that even if BNPL doesn’t cause direct harm, it still fails to improve access for underserved consumers and may contribute to financial overextension due to automatic payment defaults.
💸 CFPB Proposes Ending Civil Penalty Fund Allocations for Education Programs
The CFPB is proposing to eliminate the use of its Civil Penalty Fund for consumer education and financial literacy programs, focusing future disbursements solely on victim compensation.
- The original 2013 rule allowed leftover funds from civil penalties to be used for education and literacy efforts when victim payments were impractical.
- Since its inception, $3.6 billion has been allocated to victim compensation, while just under $29 million was directed to a single education program between FY2013 and FY2016.
- The CFPB now believes the existing rules offer insufficient transparency and oversight. The proposed revision would rescind those provisions entirely.
- The agency is seeking public comment until July 18.
🏦 Small Business Lending Compliance Dates Delayed
The CFPB has extended the compliance dates for its small business lending data collection rule by approximately one year due to ongoing litigation.
- Originally scheduled to begin in 2024, the rule now requires compliance as follows:
- Tier 1 (2,500+ originations/year): July 1, 2026
- Tier 2 (500–2,499 originations): January 1, 2027
- Tier 3 (100–499 originations): October 1, 2027
- First data filings to the CFPB will be due June 1 of the year following the start of required collection (e.g., June 1, 2027 for Tier 1).
- The Bureau is also allowing institutions to voluntarily start collecting demographic data one year ahead of their compliance deadline.
- Financial institutions may determine their tier using originations from 2022–2023, 2023–2024, or 2024–2025.
The CFPB has signaled that a new rulemaking to revisit Section 1071 is forthcoming.
