Procedural Fouls Overshadow Good Policy in CFPB’s Regulation of Buy-Now-Pay-Later
CBA and BPI Urge Consumer Financial Protection Bureau to Abide by the APA
Washington, D.C. – The Consumer Bankers Association and Bank Policy Institute called on the Consumer Financial Protection Bureau (CFPB) to abide by the Administrative Procedure Act (APA) in seeking to regulate buy-now-pay-later (BNPL) providers in a letter sent today to the Bureau. The Associations argue that the CFPB’s recently issued “interpretive rule” violates the APA due to its substantive nature. While the Associations support much of the substance of the interpretation, the CFPB should rescind the interpretation, adhere to the law and submit a formal rule through the rulemaking process, with the opportunity for the public to provide comments.
“If the CFPB is responsible for enforcing the law, it should also be responsible for following it,” CBA and BPI said upon filing the letter. “We share the same goal as the CFPB: consumers that elect to use BNPL must be protected. A rulemaking process will help lead to a more informed rule that will ultimately help the CFPB best protect consumers.”
As the CFPB reconsiders a rulemaking in compliance with the APA, it should do so with the following recommendations in mind:
- Hold all BNPL issuers to the same standards;
- Help better define and differentiate BNPL products and users from other credit products already covered by consumer protection laws; and
- Supervise the activities of nonbank BNPL providers under the CFPB’s larger participant rulemaking authority.
Background
The CFPB announced its interpretive rule on May 22, 2024, as a continuation of efforts that the Bureau initiated in 2021. The interpretive rule establishes new requirements for BNPL issuers based on requirements under the Truth in Lending Act. These include what to do when a customer requests a refund, how to investigate transaction disputes and how consumers can access their billing statements, among others.
To access a copy of the letter, click HERE.
