New York State has established a licensing and oversight framework for the buy now/pay later industry with new legislation included in its 2026 budget, providing tougher state rules as
The law will require BNPL providers that offer loans of at least one installment at any interest rate – including 0% interest – to be licensed with the state. It also requires credit disclosures, dispute resolution standards, data privacy protections, risk-based underwriting and limits on charges and fees, similar to the requirements present in the federal Truth in Lending Act and Regulation Z.
Also included in the budget were laws governing online subscription cancelations, online returns and refunds,
"This budget is all about affordability – lowering costs and helping New Yorkers with the rising cost of living," Governor Hochul said in a statement. "But our tax cuts, credits and rebates won't be much help if bad actors are able to scam or mislead New Yorkers. These new laws are about fairness, transparency, and accountability and will help consumers save money and spend it wisely."
Lawmakers in New York are working to address what they say are a need for stronger oversight in "this rapidly growing financial sector" to protect against mounting risks, including overextension, data exploitation, inconsistent
The New York legislature has been working to pass a BNPL bill all legislative session, Eamonn Moran, a partner at Holland & Knight, told American Banker.
"There were no fewer than three separate bills in New York introduced this year to regulate BNPL," Moran said. "The timing is interesting… Part of the issue here is that the legislators are viewing state action in this space as more urgent now, given the attention that's not being paid to BNPL at the CFPB federal level.
The CFPB has walked back its oversight of BNPL, saying in March in a court filing that it intended to
While the requirements aren't entirely prohibitive to BNPL providers, the requirements could give smaller lenders pause if compliance considerations are too costly, Moran said.
"A lot of these BNPL providers have typically structured their products so that it's Pay in 4, zero interest, to avoid falling under TILA and Reg Z coverage. Now, basically that model is not going to work in New York."
The law could also upend longstanding banking law in the state, Moran said. "The state's regulatory requirements are the same for banks, regardless of whether they're charted by a federal agency in New York or another state under New York law. But this regime would require state charter banks that issue by now/pay later, to apply for a license and be subject to new restrictions, while national banks would be exempt."
Penny Lee, the president and CEO of the Financial Technology Association, a trade group representing some BNPL providers, said in a statement that the legislation "reflects a fundamental misunderstanding of BNPL products.
"Consumers value BNPL products because they are transparent and easy to understand, with zero interest, no hidden fees, and no revolving debt. They are fundamentally different from credit cards and should be regulated appropriately." Lee said. "We are in favor of a balanced, effective framework for BNPL that can serve as a model for other states and hope to continue working with the New York Department of Financial Services and the Legislature to improve this flawed bill."
The American Fintech Council also disagreed with elements of the bill even after working with lawmakers in the state, CEO Phil Goldfeder told American Banker.
"We did make some progress over the last few months with the governor's office, and there was a number of items that have been adjusted since this was introduced probably last year," Goldfeder said. "Some of the challenges we still have are the definitions. The definitions as they're currently described in the bill are very broad, which has the potential to loop in other products within fintech that are not necessarily buy now, pay later."
Details of the disclosure requirements were also problematic, according to Goldeder. "Responsible BNPL companies are happy to provide disclosures to consumers and ensure complete transparency. However, some of the language was drawn specifically from language that had been used for credit cards and we think there needs to be a bit more nuance here in New York."
Goldfeder, who is a former member of the New York state legislature, is still holding out hope that it can continue to work with the lawmakers and Gov. Hochul's office to tweak the language, he said.
"I haven't ruled out the opportunity to work with the legislature to pass another bill before the end of this session [in June] to try and clean up some of the language" in addition to working with the New York Department of Financial Services, he said.
