REGULATING BUY NOW, PAY LATER CONSUMER FINANCIAL PROTECTION IN THE ERA OF FINTECH

• Published in: Columbia law review Vol. 123; no. 7; pp. 2035 - 2076
• Main Author: Soni, Sahil
• Format: Journal Article
• Language: English
• Published: New York Columbia Law Review Association, Inc 01-11-2023
• Subjects: Bank technology; Budgets; Consumer protection; Consumers; Credit; Credit bureaus; Credit cards; Disclosure; Fair Credit Reporting Act 1970-US; Federal regulation; Finance; Financing; Flexibility; Market structure; Markets; Merchants; Payments; Point of sale; Purchasing; Regulation; Regulation of financial institutions; Wall Street Reform & Consumer Protection Act 2010-US; United States > US
• ISSN: 0010-1958; 1945-2268

Recent years have seen the dramatic growth of Buy Now, Pay Later (BNPL), a class of unregulated fintech products that permit consumers to finance purchases by dividing payments into several interest-free installments. BNPL presents novel regulatory challenges because it is primarily marketed to consumers as an interest-free alternative to credit, and its distinctive market structure is characterized by lender–merchant agreements that promote financing at the point of sale. In the American context, the Consumer Financial Protection Bureau (CFPB) has announced plans to analogize treatment of BNPL to existing credit card regulations, which generally emphasize disclosure requirements.
Though undoubtedly an improvement over the unregulated status quo, this regulatory response is hardly a panacea to the industry’s risks, as it would not account for the crucial role that merchants play in driving the industry or the fact that consumers often do not even view BNPL as credit in the first place. This Note proposes a novel framework for the regulation of BNPL under the CFPB’s rulemaking authority to regulate actions undertaken by both lenders and merchants in promoting BNPL financing to consumers. This approach would provide the CFPB with the flexibility to ensure that regulations continue to stay abreast of developments in the market and the necessary tools to calibrate consumer financial protection to a landscape that is increasingly shaped by fintech.