The Consumer Financial Protection Bureau under President Trump has taken an adversarial stance toward Biden-era regulations, with the latest salvo being a decision to not enforce tighter rules for buy now/pay later lending.
The CFPB Tuesday afternoon said it would not prioritize enforcement actions stemming from a 2024 interpretive rule that classified Pay in 4 loans as credit cards, which put them under the purview of the Truth in Lending Act's Regulation Z.
"The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans," the announcement said. "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 [credit card classification] for Buy Now, Pay Later."
Several CFPB rules are on the chopping block. The language of Tuesday's BNPL release mirrors that of an April 30 announcement where the CFPB said it wouldn't prioritize the enforcement of another Biden-era regulation that would have required
The CFPB also recently said it would
Tuesday's announcement comes just over a month after the bureau revealed in a joint motion to stay a lawsuit brought by the Financial Technology Association against the CFPB over its classification of the pay-over-time industry, saying that it planned on
"The Bureau is planning to revoke the Interpretive Rule. To allow time for the Bureau to do so, the parties jointly request that the Court stay this litigation until the Interpretive Rule is Revoked," the filing said.
Eamonn Moran, a partner at Holland & Knight, said the announcement wasn't surprising. "The CFPB earlier indicated its intent to rescind this interpretive rule. Now, that's coupled with the fact that the CFPB is offering an enforcement and supervision reprieve with respect to compliance with this rule," he said.
"Although this interpretive rule has not yet been rescinded, this latest development starts paving the path for more certainty for many BNPL providers — namely, that they would not have to pivot to accommodate the new classification, provide periodic statements, and build out new technology and change a broad range of operational workflows and processes," Moran said.
The pullback marks a continuation of efforts by a more fintech-friendly administration. "I think fintechs can breathe another sigh of relief knowing that they may not need to 'fit a square peg in a round hole' with the imposition of credit card protections on BNPL products for which they may be at least somewhat ill-fitted," Moran said.
Some BNPL loans, specifically Pay in 4 loans, live in a nebulous area of regulatory oversight. Installment loans with four or less payments are exempt from the Truth in Lending Act, meaning BNPL lenders are not required to provide customers with disclosures about the terms and costs of credit like credit cards and other installment loans with four-or-more payments. The CFPB's
The CFPB's research in January found that most BNPL loans were made to
"Our members are focused on ensuring that consumers have access to responsible financial services like BNPL and often implement industry best practices long before being directed by regulators. We look forward to continuing our work with the CFPB and regulators across the country to enable responsible financial innovation without sacrificing consumer protection," said Phil Goldfeder, CEO of the American Fintech Council, in an email.
