Michael Marciano’s Post

The #CFPB has equated #BNPL firms to #CreditCard issuers, granting #consumers the same protections for #BNPL products as for credit cards. This new “interpretive rule” deems BNPL lenders essentially the same as traditional credit card providers under the Truth in Lending Act (TILA). This means that #BNPL companies must now: - Issue refunds for returned products or canceled services. - Investigate #merchant disputes and pause #payments during those investigations. - Provide bills with clear fee disclosures. The Supreme Court recently backed the #CFPB by reducing credit card late fees and overdraft penalties, strengthening consumer protections. Though BNPL firms already offer some consumer protections, the new rule ensures these are applied consistently across the industry. The rule will take effect in 60 days, with the CFPB currently accepting public commentary. While some hail this as a consumer victory, others argue that rather than forcing BNPL into an outdated credit card framework, the CFPB should have created a new framework tailored to BNPL as an Installment #Loan product. Similar to the recent challenge to the $8 cap on late fees, this new BNPL ruling may also face legal challenges. Time will tell. #fintech #posloans #buynowpaylater #lending #digitalpayments #installmentloans #retailers #millennials #genzs #shopping #ecommerce #mobilewallets #credit #debit

The extended protections for "buy now, pay later" (BNPL) loans by the Consumer Financial Protection Bureau (CFPB) is a significant step toward enhancing consumer #financialsecurity. By mandating immediate refunds on returns, detailed billing costs, and repayment pauses during charge disputes, the CFPB is addressing key areas that previously exposed #BNPLusing consumers to potential financial risks. While some BNPL providers already offer similar policies, formalizing these protections ensures a more consistent and trustworthy experience for consumers, regardless of which provider they use. When it comes to #financialwellness, "buy now, pay later" loans can be a double-edged sword and should require a disciplined and informed approach. Having a clear, outlined budget before opting for BNPL to avoid impulsive spending will help consumers plan accordingly. It’s also important to be aware of potential interest rates and fees that might apply for missed or delayed payments. Treating BNPL loans with the same seriousness as traditional credit obligations is crucial; this means making payments on time to avoid late fees and negative impacts on credit scores. Consumers can also consider alternative low-cost credit options, such as personal loans, which might offer more predictable repayment schedules. By staying informed, budgeting wisely, and choosing BNPL options judiciously, consumers can leverage the option as a tool for financial wellness rather than a source of financial strain. https://lnkd.in/d5mj_uNH #LITrendingTopics #Credit #ConsumerProtection

"("CFPB") issued an interpretive rule stating that BNPL products are actually "credit cards" under the Truth in Lending Act (TILA) and BNPL providers are "card issuers" and therefore "creditors" under, and subject to, Regulation Z." #BNPL #Payments #CFPB #regulations #compliance https://lnkd.in/gbUq23MH

Could much-needed regulation be coming to the Buy Now, Pay Later industry? 🔹 The Consumer Financial Protection Bureau (CFPB) has declared that customers of the buy now, pay later (BNPL) industry have the same federal protections as credit card users. 🔹 BNPL lenders are now deemed essentially the same as traditional credit card providers under the Truth in Lending Act, requiring them to provide refunds for returned products or canceled services, investigate merchant disputes, pause payments during investigations, and provide fee disclosures. 🔹 The CFPB addresses concerns about surging debt and ensures that BNPL providers comply with refund and dispute requirements. 🔹 The new rule will go into effect in 60 days, and the agency accepts public commentary. 🔹 BNPL providers have expressed anticipation of greater regulation and may sue the CFPB to counter the rule. 🔹 Affirm and PayPal's shares were affected by the CFPB's announcement, with Affirm's shares dropping by 5.2% and PayPal slipping by 3%. 🔹 Klarna and Affirm have responded to the CFPB's move, emphasizing the differences between interest-free BNPL and credit cards and expressing their commitment to industry standards and responsible practices. 🔹 The industry's response raises the possibility of potential litigation, similar to challenges faced by other financial players in the past. #bnpl #fintech #regulation #CFPB

Worth a read: The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule to clarify the applicability of Regulation Z to "Buy Now, Pay Later" (BNPL) lenders. The rule addresses how these lenders meet the criteria for being "card issuers" under Regulation Z, as they issue digital user accounts used to access credit. This classification means BNPL lenders are considered "creditors" and must comply with subpart B of Regulation Z, which governs periodic statements and billing disputes. Source: Consumer Financial Protection Bureau (CFPB). Use of Digital User Accounts to Access Buy Now, Pay Later Loans. May 2024.https://https://lnkd.in/guQARdFS

🛍️ BNPL Are Credit Cards?!    Right after CFPB’s funding question was cleared by the Supreme Court, the regulator served BNPL with an interpretive rule. “Buy Now, Pay Later lenders are credit card providers”. Wait. What? How can BNPL be the same as credit cards? Haven’t BNPL players always positioned themselves as the new and better alternatives to credit cards? The above statement is true. However, in CFPB’s eyes, there is no difference between these two products. “Like conventional credit cards, Buy Now, Pay Later combines payment processing and credit services, while charging transaction fees to merchants.” Hence the regulator calls out BNPL’s duties under the Truth in Lending Act: 📍 Investigate disputes 📍 Provide billing statements 📍 Refund returned products or canceled services It is a clever move for the regulator to leverage existing regulation. After all, if a regulation is designed well, it should cover existing and new lending products. Meanwhile, the identity you are fighting hard over the years to break away from, in others’ eyes, is an integral part of - you. Such is consumer credit. Such is life. #consumercredit #riskmanagement #newlending #bnpl #creditcard

The rapid evolution of #BNPL services is reshaping consumer payment habits, and more credit unions are joining the trend, including Financial Plus Credit Union - Michigan. With BNPL adoption growing, credit unions are positioning themselves to compete with larger financial institutions in the #payment space. Read how in American Banker: https://lnkd.in/eeVKmczM

📖#BNPL regulations can get confusing for customers Affirm says CFPB’s proposed BNPL rules will confuse customers Buy now pay later provider Affirm BNPL recently said consumers would be better served by rules specific to BNPL transactions, as opposed to credit card regulations. The bureau’s proposed rules would give consumers who use BNPL to pay for goods and services the same protections as credit card users. Under the interpretive rules, which were unveiled in May, BNPL lenders would be required to investigate consumer complaints, issue refunds when goods are returned or orders are canceled and provide statements similar to those provided to credit card users. The CFPB is accepting comments on its proposal until Aug. 1. The interpretative rule, which would require BNPL providers to comply with certain aspects of the Truth in Lending Act, was set to be effective on Tuesday of this week. Two trade groups, the American Fintech Council and the Financial Technology Association, sought in separate comment letters to delay implementation of the proposed CFPB rule, pointing out the complexities of complying with it. The FTA initially in June sought a 30-day extension of the comment period for the rule, and a 60-day extension of its effective date and then suggested in a follow-up letter this month that the effective date should be Oct. 1 of next year. In its letter this month, the AFC requested that the CFPB not make the new rule effective until Jan. 1. “While Affirm supports the adoption of consistent BNPL regulation by the Bureau, Affirm asserts consumers and the BNPL industry would be better served by BNPL-specific regulations designed for how consumers use BNPL products,” the company’s letter reads. “Requiring BNPL providers to comply with rules designed for open-end credit cards creates compliance challenges and confusing outcomes for consumers.” Regulations that require credit card providers to make certain disclosures to their customers when they open an account are not relevant to the buy now, pay later industry, Affirm argues. Affirm said it is concerned about the section of the interpretive rule requiring customers be provided with periodic statements. The rule “does not explain how to apply this guidance to closed-end BNPL products,” the letter says. For example, a credit card statement provides the user’s balance, but Affirm argues that each buy now, pay later loan is separate and the customer may not carry an ongoing balance. “It is not clear what content BNPL providers must include in periodic statements, if any,” the letter says Read more on Payments Dive: https://lnkd.in/d_bFb6P3

Understanding BNPL: Klarna-Style vs Traditional The Buy Now Pay Later (BNPL) market has seen rapid growth, but it’s important to distinguish between two different types of BNPL solutions: Klarna-style BNPL and traditional BNPL. Klarna-style BNPL typically allows consumers to split purchases into short-term, interest-free instalments. However, these products have come under FCA scrutiny as they are often outside existing consumer credit regulation. The FCA has launched a consultation to address concerns around consumer protection, transparency, and potential debt risks associated with these unregulated products. In contrast, traditional BNPL is already regulated, offering a deferred payment period—such as 12 months—followed by a fixed-term agreement with a pre-agreed APR. This model provides clearer terms and structured repayments, which aligns with the current consumer credit regulations. As the FCA considers bringing Klarna-style BNPL into the regulatory fold, it’s crucial for businesses to stay informed and ensure compliance with evolving rules, while continuing to offer responsible credit solutions. You can read more about the FCA’s consultation here: https://lnkd.in/ehZBhDbJ #BNPL #ConsumerCredit #Fintech #FCA #Regulation #BuyNowPayLater #Klarna #FinancialRegulation #CreditSolutions #ResponsibleLending #ConsumerProtection #RetailFinance #FintechRegulation #CreditCompliance

The world of Buy Now, Pay Later (BNPL) is in for a big shakeup thanks to a new rule from the Consumer Financial Protection Bureau (CFPB). Our latest article gives you the rundown on the new rule and how it could affect providers and merchants. #ChargebackGurus #payments #fraudprevention https://hubs.li/Q02z24410