The Consumer Financial Protection Bureau (CFPB) is preparing to revoke its controversial interpretive rule that would have subjected “pay-in-four” buy now, pay later (BNPL) providers to the same regulations as credit card companies. The reversal comes after the Financial Technology Association (FTA) filed a lawsuit challenging the rule in October 2023, with both parties now seeking to pause litigation as the CFPB moves to formally withdraw the policy.
The scrapped rule would have required BNPL firms to provide consumer protections including:
- Charge dispute rights
- Mandatory refunds for returned purchases
- Enhanced fee transparency
FTA CEO Penny Lee had argued the regulation “exceeded the CFPB’s authority” and would create market confusion without proper rulemaking procedures. The policy shift follows President Trump’s dismissal of CFPB Director Rohit Chopra, with acting head Russell Vought overseeing a broader regulatory pullback that includes:
- Dropping Zelle fraud cases against JPMorgan, Bank of America, and Wells Fargo
- Losing Senate support to oversee Apple Pay, Google Wallet, and X Payments
Industry analysts note the retreat leaves BNPL providers like Affirm, Klarna, and Afterpay operating under their current models, though bipartisan legislative efforts for tailored BNPL regulations continue in Congress. Consumer advocates warn the decision removes safeguards as BNPL delinquencies hit record highs in 2024.