CFPB set to regulate BNPL

The Consumer Financial Protection Bureau (CFPB) is to tighten up regulation of BNPL firms with the same baseline consumer protections that work for credit cards

CFPB BNPL

CFPB set to regulate BNPL. Source: depositphotos.com

CFPB director Rohit Chopra announced plans to bring the BNPL sector under supervision. The staff should identify potential interpretive guidance or rules to ensure that BNPL providers adhere to the basic protections that Congress has already established for credit cards.

The regulator launched an inquiry into the market amid concerns about accumulating debt levels and data harvesting by vendors last year. 

CFPB submitted a series of requests to Affirm, Afterpay, Klarna, PayPal, and Zip to provide detailed information about their business models and customers’ shopping behaviour. The report found that the five BNPL firms originated a combined 180 million loans in 2021, with a total amount of $24.2 billion, an increase of more than 200% from 2019.

The research discovered that currently, BNPL companies are not offering the same clear set of dispute protections that credit card issuers have. In addition, many BNPL lenders do not provide clear and comparable disclosures of the terms of the loan like other lenders are required to do.

In addition, the regulator is inspecting their data surveillance practices. In particular, it pays attention to some demographic, transactional, and behavioural data that may be used outside of the lending transaction.

Besides, CFPB has made a separate inquiry into the move of Big Tech into payments. Recently, a few tech players – most notably Apple – entered or announced their plans to enter the BNPL arena. Thus, Apple Now Pay Later was released in the new iOS16

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BNPL financing faces unprecedented challenges

Zip closes money management app in efforts to safeguard the BNPL business