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CFPB Requests Comments on “Buy Now, Pay Later”

On January 24, the CFPB issued a notice and request for comment in the Federal Register regarding the Bureau’s inquiry into “buy now, pay later” or BNPL providers.  As discussed in a Consumer Finance and Fintech post last month, the CFPB issued a series of “market monitoring” orders to five companies offering BNPL credit in order to collect information on the risks and benefits of these fast-growing loans.  According to the notice, the information obtained through this latest request will “help the Bureau better understand how consumers interact with BNPL providers, and how BNPL business models impact the broader e-commerce and consumer credit marketplaces.”

Putting it Into Practice:  The Bureau’s latest inquiry appears to signal another step, or at least an intent, to regulate BNPL directly through rulemaking or through enforcement.  As with market monitoring activity, the CFPB can use the information gathered from this request for any purpose, such as the development of UDAAP enforcement road maps. The CFPB also has the authority to supervise nonbank “larger participants” they identify in other  consumer financial markets, as they have done in the past for consumer reporting, consumer debt collection, student loan servicing, international money transfer, and automobile financing.  As a result, defining a group of larger BNPL participants for supervision may also be an outgrowth of the Bureau’s current discovery efforts.  As the rapid growth of BNPL draws the CFPB’s attention and while the regulatory climate continues to evolve, BNPL providers should continue to develop compliance policies and procedures to structure and implement a BNPL program consistent with consumer protection laws and regulatory standards.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 27
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
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