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Following media speculation, the US Consumer Financial Protection Bureau (CFPB) has confirmed that it will not be enforcing its buy now, pay later (BNPL) rules.
The regulator announced that “it will not prioritise enforcement actions taken on the basis of the Truth in Lending (Regulation Z)” regarding a rule crafted last year for access to BNPL loans.
It added that it “will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans”.
“The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses,” the CFPB said.
In its announcement, the CFPB also said that it is “further contemplating taking appropriate action to rescind buy now, pay later”, which would mean the compliance requirement being dropped completely.
This pivot away from the more consumer protection-focused agenda is not surprising, given the Trump administration’s apparent desire to drop many of the CFPB’s more interventionist regulations.
It comes a week after the regulator announced that it will keep “enforcement and supervision resources focused on pressing threats to consumers” by not enforcing a rule that increases transparency in small business lending rules.
The shift on BNPL oversight significantly impacts former CFPB director Rohit Chopra’s legacy, as he had been one of the biggest cheerleaders for tougher oversight.
As covered by Vixio, he told Congress in a June 2024 public hearing that “the CFPB cannot be behind the eight ball when it comes to BNPL”.
“We have tried to stay ahead of it. It is fast-growing, it is an important part of our consumer credit market, and we need to make sure it's growing on merits, not based on regulatory loopholes.”
Regulation does exist at state level in some parts of the US. For example, California and Maryland have a licensing regime in place, and states including New York, Massachusetts and Oregon are also thought to be considering state-level requirements.
Considering how states such as New York are chalking up laws at the moment to maintain CFPB-esque oversight at the state level, one thing that could be seen in Democrat leaning states is the maintaining of federal rules if deregulation continues to take hold.
A rule that did not impress the industry
Firms in the BNPL sector often say that they are enthusiastic about being regulated, and some have been big advocates of regimes in countries such as the UK.
However, this was not the case in the US, where stakeholders took a number of actions to make clear their unhappiness with the CFPB’s regime.
For example, the Financial Technology Association (FTA), whose members include BNPL heavyweights PayPal, Klarna and Block, announced in October last year that it was taking the CFPB to court over the rule, calling it “arbitrary” and “capricious”.
In the complaint, the FTA accused the agency of exceeding its authority, flouting its procedural obligations and misinterpreting existing legislation on credit regulation.
Firms such as Klarna also criticised the rule at the time. For example, the Swedish fintech giant commented that it “is baffling that the CFPB fails to acknowledge the fundamental differences between BNPL and credit cards in [its] guidance and this announcement does nothing to address the $1.15trn in credit card debt”.
US BNPL firm Affirm had been more supportive of the CFPB’s rules, but did suggest that some components of the compliance requirements risked consumer “confusion”.
