BNPL Providers File Lawsuit Against CFPB

The Financial Technology Association (FTA), representing leading Buy Now, Pay Later (BNPL) providers such as Affirm, Klarna, and PayPal, has filed a lawsuit against the US Consumer Financial Protection Bureau (CFPB) in an attempt to block a new rule extending credit card protections to BNPL products.

The rule, issued by the CFPB in May 2024, imposes requirements like issuing billing statements and investigating disputes, which BNPL providers argue do not reflect the nature of their products. Penny Lee, CEO of the FTA, stated, "The CFPB is seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without adhering to required rulemaking procedures."

The FTA contends that the rule was introduced without the proper notice-and-comment process, as required by the Administrative Procedures Act, and calls for its reversal. As BNPL services grow in popularity, this lawsuit could have significant implications for the future regulation of the sector.