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As the state formalises its bespoke licensing regime, providers will need to review pricing structures and focus on transparency and disclosures to meet consumer protection standards.
Proposals announced by the New York State Department of Financial Services (DFS) implement the Buy Now, Pay Later (BNPL) Act, enacted in May 2025, which creates a comprehensive supervisory framework for BNPL providers operating in the state.
Among other things, the regulations aim to introduce a licensing and supervision framework for BNPL activity in New York, prohibit excessive fees and limit late and penalty fees, establish rules for the timely resolution of consumer disputes and protect consumer data from misuse or exploitation.
Announcing the framework, New York Governor Kathy Hochul said: “These new nation-leading regulations ensure that lenders know we have clear disclosures, limits on fees and real oversight so families don't get pushed into a debt spiral while big financial companies cash in.”
The regulatory timeline is tight: a ten-day pre-proposal comment period began on February 23, 2026, to be followed by a formal 60-day public comment period upon publication in the State Register.
Plugging the gaps left by federal withdrawal
New York’s work on regulating BNPL services is a reaction to a lack of federal regulation in this area.
Although the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule in May 2024 that would have subjected BNPL providers to the same Truth in Lending Act regulations as credit card issuers, this rule was withdrawn in the agency’s May 2025 mass withdrawal of guidance documents.
So far, New York is the only state with a standalone regulatory framework for BNPL products. The state’s BNPL Act creates a dedicated licensing regime for BNPL providers through the DFS, making loans from unlicensed providers unenforceable and allowing safeguards such as disclosure, dispute resolution, fee limits and data protections.
Certain states currently oversee BNPL by applying existing lending laws rather than creating BNPL-specific frameworks. For example, California, Nevada, Maryland and Georgia all classify BNPL products as consumer loans or small loans, meaning providers must obtain standard credit or lender’s licences to operate.
Other states have not yet classified BNPL products, which means the regulatory landscape for providers operating across the country is unclear.
However, states are increasingly coordinating their efforts to monitor this sector. In December 2025, a coalition of seven state attorneys general launched an inquiry to investigate BNPL compliance, consumer risks and lending practices.
State-level regulators across the US see federal regulators’ step back as a call to action, with the New York DFS leading the way.
Their attempts to plug gaps in federal consumer protection rules are increasing compliance, liability and reputational risk, meaning that affected payment service providers (PSPs) and banks must navigate a fast-changing state-level regulatory patchwork while maintaining customer trust.
However, some states have also signaled coordination on consumer protection. In April 2025, 23 attorneys general sent a letter to Congress urging the House of Representatives to uphold the CFPB’s Overdraft Rule.
In the letter, the attorneys general, including those from New York, California and New Jersey, argued that the rule protects consumers from excessive and often unexpected charges that can lead to involuntary account closures, damaging customers’ credit and even driving them out of the banking system altogether.
Nevertheless, the growing fragmentation of payments regulation in the US is a challenge that PSPs and other organisations must address on an ongoing basis, increasing the complexity of operating nationally.
Federal inaction and coordinated state-level regulatory efforts
Organisations offering BNPL services in New York will need to prioritise a number of actions in response to the DFS’ proposed regulations.
First, they should engage with the rulemaking process – firms have an immediate opportunity to provide input on the regulations via the initial ten-day preproposal comment period and the subsequent 60-day public comment period.
Over the medium term, and assuming the rules are implemented in largely their current form, firms will need to ensure that their pricing structures align with the DFS’ forthcoming “fairness” standards, which will likely include hard caps on late fees and the elimination of “convenience” charges that could be construed as predatory.
They will also have to focus on transparency and disclosures, implementing robust customer-disclosure practices, including explicitly informing consumers if their loans will be reported to credit bureaus.
Looking ahead, continued federal inaction and increasingly coordinated state-level efforts are likely to remain the key themes in the US regulatory landscape.
The December 2025 inquiry launched by the coalition of attorneys general suggests that cooperation on a standardised state-level approach to BNPL and other payments regulation may become a path to greater coherence.
In the meantime, firms should prepare for a more enforcement-driven environment, with state regulators and attorneys general targeting non-compliant BNPL providers through cooperative enforcement actions.
They will likely focus on failings in consumer protection, so firms must ensure that they have processes in place to adequately assess borrowers’ capacity to repay; handle errors, consumer disputes and returns; and manage late payments.
Given the rollback of federal oversight and the resulting state-by-state patchwork of regulations, firms operating across multiple states will have to continuously monitor state-specific rules while actively advocating for consistent industry standards to ease operational burdens.
PSPs and banks that successfully navigate this complexity can transform regulatory adherence into a strategic advantage.
By embedding consumer protections, documenting internal controls and conducting regular compliance audits, firms can build trust and differentiate themselves in a competitive market.
