The CFPB intends to revoke its Buy Now, Pay Later interpretive rule, according to a status report and joint motion to stay filed by the Bureau and the Financial Technology Association (FTA) in a case brought by the FTA challenging the rule.
The revocation is one of several steps the Trump Administration is taking to reverse Biden Administration CFPB actions.
The CFPB and FTA have asked the U.S. District Court for the District of Columbia for a stay until the interpretive rule is revoked, with the CFPB proposing to provide status reports about its progress every 30 days starting on June 2.
The interpretive rule provides that certain BNPL programs involve “digital user accounts” and that those digital user accounts are “credit cards,” making the BNPL providers “card issuers.”
As a result, many BNPL providers are “card issuers” subject to many of Regulation Z’s open-end credit provisions. These Regulation Z requirements include account-opening disclosures, billing statements, changes in terms disclosure, payment processing, treatment of credit balances, issuance of cards, liability for unauthorized use, merchant disputes, billing disputes, crediting of returns, advertising, and, as the CFPB noted in a footnote, potentially application and solicitation disclosures.
Given the extensive change in interpretation and requirements imposed on BNPL providers, the FTA has argued that the Administrative Procedure Act required the CFPB to treat the rule as a legislative rule, and, therefore, to go through the notice and comment process in issuing the rule. Instead, the CFPB issued it as an interpretive rule without going through that formal process.
The FTA has also alleged that the new rule exceeds the CFPB’s statutory authority by imposing obligations beyond those permitted by TILA and by contravening TILA’s effective-date requirement for new disclosure requirements.
Finally, the FTA has argued that the interpretive rule was arbitrary and capricious under the Administrative Procedure Act because the CFPB overlooked that certain TILA requirements with respect to credit cards are a poor fit for BNPL products and because the CFPB did not give BNPL providers sufficient time to come into compliance.
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