Senators urge BNPL crackdown | Payments Dive


Dive Brief:

  • Senators Jack Reed (D-R.I.), Tammy Duckworth (D-Ill.) and Sherrod Brown (D-Ohio) are calling on the Consumer Financial Protection Bureau to bring the largest buy now, pay later providers under more federal supervision.
  • In a letter to CFPB Director Rohit Chopra dated March 22, the three urge the bureau to bring big BNPL lenders under its watch to “better protect consumers from unfair, deceptive and abusive acts and practices.”
  • Since the CFPB has supervisory authority over larger players in the consumer finance world as well as the ability to determine who fits that description, “we urge you to exercise this authority to supervise the largest BNPL lenders,” the senators wrote to Chopra. The bureau has received the letter and is reviewing it, a CFPB spokesperson said Tuesday. 

Dive Insight:

The lawmakers argued the BNPL lenders are currently only subject to supervision by the states in which the companies do business, which can make for a patchwork set-up. Given the rising popularity of BNPL in the U.S., supervisory expectations for those lenders have some catching up to do, they wrote.

Underscoring BNPL’s outlier status when it comes to regulation, senators also said oversight from federal regulators “should not turn on whether a borrower uses BNPL credit from a nonbank or a credit card issued by a bank.”

Regulation has been a closely watched topic in the BNPL space. When the CFPB issued its long-awaited BNPL report last September, Chopra said the bureau was considering rules or “interpretive guidance” to make sure BNPL providers follow laws that apply to credit card companies.

At that time, the bureau also said it planned to institute supervisory examinations of BNPL companies. When asked Tuesday about the timeline for such examinations, the CFPB spokesperson said the bureau “can neither comment on, confirm, nor deny any ongoing investigatory or supervisory work because that work is confidential.”

Supervisory programs “should be tailored to the size of each BNPL lender, the volume of its lending activity, and the extent of existing state oversight,” the senators wrote in last week’s letter. 

In prodding Chopra to surveil BNPL providers, lawmakers noted such supervision should include on-site examinations to review lenders’ books and records and evaluation of compliance systems; issuing related reports and compliance ratings; and “aggressively and publicly enforcing” consumer financial protection laws if lenders fail to confront issues raised during those examinations.

The CFPB has also pushed credit reporting bureaus to develop processes for taking BNPL into account on consumer credit profiles, but they have largely failed to make progress so far.


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