State acts as federal BNPL oversight remains uncertain
Earlier this month, New York adopted the first US state-level licensing regime for Buy Now, Pay Later (BNPL) providers.
This new framework, introduced through Article 14‑B of the New York Banking Law, obliges non-bank BNPL lenders to hold a licence from the New York Department of Financial Services (NYDFS), adhere to capital standards, cap fees and charges, and enhance consumer disclosures.
Superintendent Adrienne A. Harris said the authority granted under the fiscal‑2026 budget will “ensure consumers are protected in this growing space” .
Among its provisions, the law mandates refunds or credits for returned items, transparent dispute processes, and bans data-sharing with credit agencies.
In contrast, the Consumer Financial Protection Bureau (CFPB) has pulled back from its BNPL oversight. Its May 2024 interpretive rule had classified BNPL lenders as akin to credit-card issuers, imposing dispute rights and billing protections.
However, by March 2025, the CFPB announced it “will not prioritise enforcement” and may rescind the rule. This federal retreat leaves states like New York to bridge consumer protection gaps.
Impact on consumers and lenders
The new state law addresses key consumer concerns. With nearly 14% of BNPL transactions disputed or returned in 2021, stronger dispute and refund rights are essential. BNPL users will benefit from clearer terms at checkout, capped charges, and the ability to pause payments during investigations.
For lenders, the landscape is shifting. Institutions operating federally may structure themselves to avoid licensing. Those within New York will face heightened compliance demands, including capital buffers and operational oversight.
National banks, federal savings banks, and federally chartered credit unions are exempt from the law, while state‑chartered banks and non‑bank lenders must comply.
This creates a regulatory uneven field, allowing some providers to escape scrutiny. But the definition of BNPL is broad enough to include many retail‑credit products, potentially sweeping in more lenders than intended.
What happens next
Though enacted in June 2025, the licence requirements come into force six months after NYDFS finalises its regulations. Until then, there is a window for industry input on rulemaking, and a probationary phase during which lenders can prepare.
With federal policy moving in the opposite direction, New York’s model may become a testbed. Other states and regulators will monitor closely whether this approach boosts consumer protection or creates market complexity.
