CFPB Classifies BNPL Firms as Credit Card Issuers, Extending Consumer Protections, Generally Credit Neutral

This commentary reviews the new rule by the Consumer Financial Protection Bureau (CFPB) that classifies Buy Now, Pay Later (BNPL) firms as credit card issuers.

Key highlights include:
-- The CFPB now considers BNPL firms as credit card issuers, giving BNPL users protections similar to credit card holders.

-- BNPL lenders are now required to investigate disputes, process refunds for returns or canceled services, and send regular billing statements.

-- Despite strong growth over the past several years, BNPL still accounts for a small portion of consumer spending in the U.S. and in our view it does not pose a major competitive threat to the credit card industry.

-- While we do not currently have credit ratings on BNPL firms, we see the CFPB's action as largely neutral for the sector's credit risk profile.

“While some of these protections and processes may have already been offered by BNPL lenders, the CFPB's rule essentially levels the playing field in the space for new and existing providers, as well as relative to credit card issuers. Further, the CFPB's rule could be viewed as a precursor of increased regulatory scrutiny in the BNPL space in the coming years” said Yanni Koulouriotis, CFA, Vice President