In a letter to the CFPB released on September 10, several Senate Democrats implored the Bureau to establish stricter guardrails for BNPL providers, arguing that consumer harm will occur absent action taken to reign in the industry.
The letter, addressed to CFPB Director Rohit Chopra, urges the Bureau to adopt its interpretive rule (previously discussed here), confirming that BNPL lenders qualify as credit card providers under the Truth in Lending Act and Regulation Z. Specifically, the letter proposes the CFPB establish the following guidelines for BNPL:
Implement Credit Card-like Protections. BNPL provides should be required to provide monthly billing statements for better transparency, impose reasonable and proportional penalty fees, and ensure proper dispute resolution mechanisms are in place for merchant-related issues.
Supervisory Oversight for BNPL Lenders. The Senators urge the CFPB to bring the largest BNPL providers under CFPB supervisory oversight. The letter argues that subjecting all BNPL lenders to uniform compulsory federal supervision by the CFPB will ensure no violations of consumer protection laws go overlooked, and minimize consumer harm.
Collect and Publish Additional BNPL Data. The Senators urge the CFPB to publish more data on BNPL usage, including consumer delinquency and default rates, and use this data to inform regulatory adjustments and identify potential sources of consumer harm. For example, if the data shows an increase in default rates, the CFPB should consider additional regulations such as ability-to-repay requirements and tighter underwriting criteria.
Putting It Into Practice: The letter aligns with a recent push by the CFPB to establish clearer standards for BNPL providers (previously discussed here and here). Should the Bureau implement the Senators’ recommendations, this will mark a significant development in the Bureau’s oversight of the BNPL industry. BNPL providers should continue to monitor these events as their compliance obligations may soon change.