The US Consumer Financial Protection Bureau (CFPB) announced on 6 May that it will no longer prioritise the enforcement of Buy Now, Pay Later (BNPL) regulations.
Instead, the agency will “keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans”.
BNPL providers have been in ongoing discussions with the CFPB for the past year, largely centred around the agency’s interpretive rule issued in May 2024. That rule stated certain BNPL products would be regulated within the same parameters as credit cards under the federal Truth in Lending Act.
However, the CFPB signalled a shift in direction on 26 March, sharing its intention to revoke that rule. This latest announcement further tilts the regulatory landscape toward a lighter approach for BNPL firms, which has been a characteristic of the President Donald Trump administration.
In an official statement, the CFPB said: “The CFPB is announcing today that it will not prioritise enforcement actions taken on the basis of the Truth in Lending (Regulation Z); Use of Digital User Accounts to Access Buy Now, Pay Later Loans, 89 Fed. Reg. 47,068 (May 31, 2024) (“Buy Now, Pay Later”).
“The CFPB will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans. The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses. The Bureau is further contemplating taking appropriate action to rescind Buy Now, Pay Later.”
Companies in the sector, such as Klarna, Affirm and Afterpay, will now be able to operate with greater clarity. Some will argue this was always the correct outcome, given that the sector faced regulatory scrutiny from the outset.
Klarna was among the most vocal critics of the CFPB’s clarification. In a blog post last year, the company likened comparing BNPL products to credit cards to “comparing oranges to apples”.
While most stakeholders welcomed the CFPB’s move to rescind the rule, the agency’s latest statement offers little indication that it intends to replace the original motivation behind the rule, which was to protect consumers from what remains a largely unregulated financial product.
Global regulation gathers pace
Elsewhere, other countries have taken a more measured approach to regulating their respective BNPL sectors, but are now moving forward.
In January, for example, Australia’s financial watchdog, the Australian Securities and Investments Commission, reminded providers they must obtain a credit licence ahead of new legislation coming into force.
This places the US in an increasingly unique position as a less regulated environment for BNPL providers. As a result, it’s becoming a more attractive location for public listings, with Klarna having already selected the US as its IPO destination, though plans are currently on pause due to market volatility.
Meanwhile, the UK is yet to make much progress on BNPL regulation. However, if it hopes to attract investment and growth, it may need to follow the US’ stance with a more relaxed approach, something that Prime Minister Keir Starmer may be open to following, a relaxation of regulations for payment and financial companies.
