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In a move consistent with its new hands-off approach, the US Consumer Financial Protection Bureau (CFPB) has reiterated its argument against the now-withdrawn rule.
In a status report submitted to the US District Court for the District Of Columbia in reference to a lawsuit brought by the Financial Technology Association (FTA), the regulator noted that the buy now, pay later (BNPL) interpretive rule was among the guidance documents withdrawn en masse in May.
It further affirmed that it has no plans to reissue the rule, which it said “inappropriately applied open-end credit regulations to closed-end BNPL loans with little benefit to consumers and substantial burden to regulated entities.”
The rule was introduced in 2024, when the CFPB had a more interventionist approach under then-director Rohit Chopra.
It sought to increase transparency and compliance requirements in the growing BNPL sector by treating BNPL digital user accounts as credit cards and their providers as card issuers.
This meant they were subject to the provisions of Regulation Z, including account opening disclosures and payment processing requirements.
The FTA brought a lawsuit challenging the rule, which its president and CEO, Penny Lee, described as “ flawed and erroneous.”
In March 2025, the CFPB and the FTA filed a joint motion to stay the lawsuit, with the agency stating its intention to revoke the rule.
Alongside the latest status report, the two organisations submitted a joint notice of voluntary dismissal, with the CFPB confirming that it will not be reissuing the rule.
“The Bureau has determined that it does not intend to reissue the BNPL Interpretive Rule because it was procedurally defective and the interpretation included therein applied ill-fitting open-end credit regulations to BNP products, which are generally structured as closed -end loans,” the agency said in its report.
Notice and comment process
The FTA had argued that the CFPB was required to go through a notice and comment process with the interpretive rule, but had not done so.
It also said the rule was arbitrary and capricious and that it exceeded the CFPB’s statutory authority.
In its status report, the CFPB agreed with the FTA’s position, stating that “any change to include closed-end BNPL credit in the definition of credit card should have been made through notice and comment rulemaking procedures.”
It also agreed that the credit card requirements did not suit BNPL products.
The agency added, “The BNPL Interpretive Rule opined that for closed-end BNPL credit, ‘a BNPL digital user account’ is a credit card despite not offering any interpretive reason why that would be so when account numbers are not credit cards.”
It further noted that the interpretive rule extended these provisions to BNPL loans even though they are short-term, closed-end instalment products that typically carry no finance charge.
The CFPB said: “As a result, BNPL consumers would gain limited value from the mandated disclosures. In addition, the timing requirements for periodic statements, in particular—also designed for revolving credit—are mismatched to the repayment schedule of the traditional BNPL loans model, imposing significant operational burdens on BNPL providers who would have had to comply with the now-withdrawn Interpretive Rule”.
Door open to state regulation
The CFPB’s reinvention under the Trump administration as a hands-off regulator and its withdrawal of significant amounts of guidance leave a gap in the US regulatory framework that states may seek to fill.
In this instance, the revocation of the BNPL interpretive rule leaves the door open for states to impose their own rules on the sector – indeed, New York recently announced plans to establish a licensing and supervision framework for BNPL providers.
Over time, this could create a patchwork of different BNPL regulatory regimes from state to state, increasing complexity for providers.
Meanwhile, the future of the CFPB itself remains uncertain. On June 20, Senate referee, Elizabeth MacDonough, announced that Republican attempts to slash the agency's funding were in breach of budgetary rules and could not be approved by a simple majority vote.
The Bureau’s funding changes were to have been made in the Senate as part of President Trump’s One Bill Beautiful Bill Act.
Since the second Trump administration began, the CFPB has been buffeted by personnel changes and budget cuts, and has withdrawn dozens of guidance documents and vacated a number of its own rules.
Time will tell whether the agency survives, and in what form, but the end of the debate over the BNPL interpretive rule is in keeping with the direction of travel.
