January 31, 2022

NAFCU Reg Alert reviews CFPB’s inquiry into BNPL

Reg AlertNAFCU Friday sent members a Regulatory Alert regarding the CFPB’s recently issued notice and request for comment regarding buy now pay later (BNPL) programs. The bureau launched the inquiry as an attempt to collect information on the risks and benefits of BNPL loans, after issuing market monitoring orders specifically requesting information from BNPL providers Affirm, Afterpay, Klarna, PayPal, and Zip.

Of note, although the concept of BNPL has been around for several decades in the form of retail financing,  it is now being driven by fintech and technology companies, raising concerns surrounding lack of federal oversight, insufficient consumer data protection, and failure to take into account applicants’ credit history and ability to repay in the approval process.

Through the Regulatory Alert, NAFCU highlights:

  • the CFPB is seeking information on BNPL business models and transaction metrics, loan performance metrics, consumer protections, user contacts and demographics, data harvesting, and data monetization;
  • the collected data is intended to help the bureau better understand consumer interaction with BNPL providers and how these models impact the broader consumer credit marketplaces; and
  • the Bureau has indicated that it will not pursue enforcement, supervisory, or rulemaking actions as a result of this inquiry. The Bureau has also expressed interest in potentially reviewing account data from depository institutions to better understand the proliferation of BNPL.

Comments on the notice and request for comment are due to NAFCU Feb. 25 and can be submitted through the alert; comments are due to the CFPB March 25.

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