Washington, D.C. – The US Consumer Financial Protection Bureau (CFPB) has announced an interpretive ruling that buy now, pay later (BNPL) lenders will be subject to the same regulations as traditional credit card issuers. This decision mandates that BNPL providers extend key legal protections and rights to consumers, similar to those offered by credit card companies.
The ruling ensures that consumers using BNPL services will now have the right to dispute charges and demand refunds from lenders after returning a purchased product. The CFPB’s decision comes after a comprehensive inquiry into the rapidly growing BNPL market, initiated over two years ago, which has highlighted ongoing consumer complaints related to refunds and disputed transactions.
A CFPB market report revealed that over 13% of BNPL transactions involved returns or disputes, with consumers disputing or returning $1.8 billion worth of transactions in 2021 alone at the five major firms surveyed.
CFPB Director Rohit Chopra emphasized the similarities between BNPL services and conventional credit cards, noting that both combine payment processing and credit services while charging transaction fees to merchants. “When consumers check out and choose buy now, pay later, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised,” Chopra stated. “Regardless of whether a shopper swipes a credit card or uses buy now, pay later, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”
For consumers, this ruling means BNPL lenders must now investigate disputes, issue refunds for returned products or canceled services, and provide periodic billing statements akin to those received for traditional credit card accounts.
The CFPB is currently soliciting comments on the findings, with the final date for submission set for August 1.