- Trump’s CFPB pulls back from enforcing buy now, pay later rule.
- Fintech lenders no longer required to comply with stringent consumer protections.
What happened: CFPB reverses BNPL enforcement
The Consumer Financial Protection Bureau (CFPB) has announced that it will not prioritise enforcement of a rule classifying buy now, pay later (BNPL) providers as credit card issuers. This decision marks the third time under President Donald Trump that the CFPB has rolled back key regulations. The rule, established during Joe Biden’s presidency, required BNPL providers to adhere to the Truth in Lending Act, which includes standardised disclosures, refund processing, and formal dispute investigations. Fintech companies, including Affirm, had argued that these requirements would confuse users and add unnecessary friction. The CFPB’s move comes as new data shows increasing financial problems among BNPL users.
The CFPB’s decision to drop enforcement of the BNPL rule has significant implications for fintech lenders. Companies like Affirm and Klarna, which had voiced opposition to the rule, will no longer be required to comply with the more stringent consumer protections. The CFPB is also considering rescinding the rule entirely, citing a need to focus on “pressing threats to consumers.” This move follows a lawsuit filed by the Financial Technology Association in October, which claimed the CFPB overstepped by imposing credit card-like restrictions through an interpretive rule. The decision raises questions about the future of consumer protections in the BNPL market.
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Why it is important
The CFPB’s decision to drop enforcement of the BNPL rule is significant as it reflects a broader trend of regulatory rollbacks under the Trump administration. This move could impact consumer protections, particularly as data shows increasing financial problems among BNPL users. The CFPB’s focus on “pressing threats to consumers” highlights the ongoing debate over the appropriate level of regulation in the fintech industry. This decision underscores the need for a balanced approach to regulation that protects consumers while fostering innovation.
