May 22, 2024 - Business

CFPB plans new BNPL protections

Illustration of a hundred dollar bill being slid through a credit card machine.

Illustration: Aïda Amer/Axios

The consumer protections you get when you pay with a credit card should also apply when you pay with buy now pay later (BNPL) schemes. That's according to a proposed rule from the Consumer Financial Protection Bureau.

Why it matters: The rule would formalize conventions that have informally been in place, at least at the largest BNPL lenders, for some time. But it also means that BNPL won't get any special treatment.

The big picture: Klarna and other BNPL lenders already offer credit cards — and Klarna's is quite innovative.

  • Credit card rules therefore already apply to some BNPL lending;. The CFPB rule would simply ensure they apply to all of it.

The catch: At BNPL lender Affirm, refunds are issued if the store's own policy has been violated.

  • Credit card return protection, by contrast, allows buyers to request a refund even if the retailer does not allow returns on purchases.

What they're saying: "Any mechanism, tool, or procedure that consumers can use from time to time to buy goods or services on credit gets the protections that consumers have come to know and expect with credit cards," writes CFPB director Rohit Chopra.

The other side: "Trying to regulate BNPL like a credit card is like comparing apples with oranges," wrote BNPL giant Klarna in a blog post on Wednesday.

  • "It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways."
  • Klarna declined to provide Axios with any details on what any such differences in regulation might look like in practice.
  • An Affirm spokesman told Axios "we are encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates."

The bottom line: BNPL is here to stay — and regulators are taking action to ensure they're in control.

Editor's note: This story has been corrected to remove a mention of Affirm as one of the BNPL lenders that already offer credit cards.

Go deeper