The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule, announcing that Buy Now, Pay Later (BNPL) services are classified as credit card providers.
The new rule states that BNPL providers must adhere to consumer legal protections and rights that are used by credit card lenders.
(Photo : rupixen via Unsplash)
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CFPB Resolves Dispute on BNPL Transactions With New Rule
In a press release, the bureau explained that the interpretive rule stemmed from the increasing complaints on BNPL transactions. The move also seeks to bring consistency to the market, considering its popularity.
"Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books," said Rohit Chopra, CFPB director.
Under the same regulations of credit card providers, BNPL services are now required to investigate disputed charges and handle customers who are demanding for refund after returning a product. The customers are also entitled to the same legal protections and rights used by credit card companies.
BNPL Soars Popularity Among E-Commerce Landscape
The BNPL market has been growing rapidly in the past few years. Several retailers have adopted the strategy, especially during shopping holidays, to encourage customers to buy things without paying immediately.
Lenders promote the service as a different form of shopping, allowing customers to pay for a product in four installments. This is often used to market expensive products and services without having to pay the interest.
Under the Truth in Lending Act, BNPL providers must investigate disputes initiated by consumers and pause payment requirements during the investigation. Credits must be refunded to the customers' accounts upon canceled or returned services and billing statements must be presented to customers.
The CFPB opened its line for feedback on the new rule and will accept comments until August 1.
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