Buy now, pay later (BNPL) providers in the US will be subject to new requirements introduced by the Consumer Financial Protection Bureau (CFPB).
A review of the US BNPL space has seen the CFPB classify all BNPL lenders as credit card providers, and as such users of these services will be subject to the same legal protections and rights that apply to conventional credit cards.
The CFPB’s new requirements for BNPL fall under the same remit as credit card providers in three ways. These are regarding the investigation of disputes, refunding of returned products or cancelled services, and provision of billing statements.
BNPL customers will now have a right to dispute charges and demand refunds from lenders after returning a purchased product.
“When consumers check out and choose Buy Now, Pay Later, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised,” said CFPB Director, Rohit Chopra.
“Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”
The CFPB based its decision on a market report which found that more than 13% of BNPL transactions involved a return or dispute. The survey of five firms found that people disputed or returned $1.8bn in transactions.
The regulator believes that a failure to provide dispute protections can create chaos for consumers when attempting to return merchandise.
BNPL as a payment method has increased rapidly in recent years, with both the US and European markets seeing a huge uptick in usage of these payments services.
This has seen firms like Klarna, a Swedish fintech firm with a strong focus in BNPL, undergo a period of significant success. It has also seen the sector fall under an increasingly intense regulatory spotlight.
The CFPB’s decision this week follows the scheduling of meetings between the regulator’s Director, Chopra, and the European Commission’s Commissioner for Justice and Consumer Protection, Didier Reynders. BNPL, over indebtedness and AI are the core talking points of the forthcoming discussions.
