CFPB Says Certain “Buy Now, Pay Later” Plans Subject to TILA Credit Card Rules

The CFPB has issued an interpretive rule stating that digital user accounts that can be used to access credit—particularly “buy now, pay later” (BNPL) plans—are subject to certain Truth in Lending Act provisions for credit cards.

The CFPB noted that these types of accounts typically arise in a few scenarios.  First, a BNPL lender may contract directly with an online merchant to have a BNPL payment option added to the merchant’s website or mobile app checkout.  Second, consumers can sign up on the BNPL lender’s own website or mobile app to create an account, which in turn generates a one-time-use payment account number which the consumer can enter into the merchant’s normal credit card payment checkout option.  Additionally, BNPL options may be available through web browser extensions, or for accounts which are created in-store.

The CFPB found that these types of payment accounts are a “credit device” and would fall under parts of Regulation Z which apply to “closed-end loans payable in four or fewer installments without a finance charge.”  In turn, Regulation Z’s rules covering these types of credit products—including credit card dispute provisions and refund rights—would therefore apply to BNPL products.

This new interpretive rule will go into effect 60 days after it is published in the Federal Register.  Additionally, while the CFPB takes the position that notice and comment rulemaking procedures are not required for this interpretation, it will accept comments on the new rule until August 1, 2024.