The Bank Policy Institute and the Consumer Bankers Association have urged the Consumer Financial Protection Bureau (CFPB) to adhere to the Administrative Procedure Act (APA) in its regulation of buy-now-pay-later (BNPL) providers. In a letter sent today, the associations argued that the CFPB’s recently issued “interpretive rule” violates the APA due to its substantive nature.
While expressing support for much of the interpretive rule's content, the associations stated that the CFPB should rescind it, comply with legal requirements, and submit a formal rule through the proper rulemaking process, allowing public commentary.
“If the CFPB is responsible for enforcing the law, it should also be responsible for following it,” they remarked. “We share the same goal as the CFPB: consumers who elect to use BNPL must be protected. A rulemaking process will help lead to a more informed rule that will ultimately help the CFPB best protect consumers.”
As part of reconsidering a compliant rulemaking process, they recommended that:
- All BNPL issuers be held to uniform standards.
- Clear definitions differentiate BNPL products and users from other credit products covered by consumer protection laws.
- The activities of nonbank BNPL providers be supervised under the CFPB’s larger participant rulemaking authority.
The CFPB announced its interpretive rule on May 22, 2024, as an extension of efforts initiated in 2021. This rule sets new requirements for BNPL issuers based on mandates under the Truth in Lending Act, including procedures for handling customer refund requests, investigating transaction disputes, and providing access to billing statements.
The Bank Policy Institute is a nonpartisan organization representing universal banks, regional banks, and major foreign banks operating in the United States. It conducts academic research on regulatory and monetary policy issues and represents financial services in matters related to cybersecurity and information security.
Sean Oblack can be contacted at sean.oblack@bpi.com and Billy Rielly at brielly@consumerbankers.com for further information.