WASHINGTON – Consumer Reports and the National Consumer Law Center, on behalf of its low-income clients, have filed a comment letter with the CFPB that offered strong support for an interpretive rule that states BNPL accounts are considered credit cards.
As a result, the CFPB said BNPL companies must provide borrowers with the right to dispute charges and get refunds, in addition to clear account opening disclosures and periodic billing statements.
Additional Protections Urged
The organizations are urging the Bureau to extend additional protections to BNPL users that currently only apply to credit cards. The NCLC and Consumer Reports also joined a shorter comment submitted by a coalition of 90 consumer and civil rights groups.
“The CFPB’s new rule will help ensure consumers who use BNPL credit can dispute charges and get their money back promptly just as they are guaranteed by law when they use a credit card,” Jennifer Chien, senior policy counsel at Consumer Reports, said in a statement. “Unfortunately, BNPL credit still lacks a number of critical consumer protections that put borrowers at risk. The CFPB should strengthen the rules governing the largely unregulated BNPL market and ensure consumers get the same protections they are entitled to with a credit card.”
What Congress Intended
Added Lauren Saunders, associate director of the NCLC, “Buy Now, Pay Later accounts are a form of credit card because they can be used for purchases at the point-of-sale, and Congress intended credit card protections to apply broadly to protect consumers. In addition to responding to consumer disputes, BNPL companies should provide clear, uniform fee disclosures, extend credit that consumers can afford to repay, and charge only reasonable late fees, just as protections required for traditional credit cards.”
The organizations said that while many consumers report positive experiences with BNPL credit, complaints to the CFPB about the challenges borrowers face getting timely assistance with returns and refunds have risen steeply in recent years, and data also “increasingly show that consumers are getting into unaffordable debt with BNPL credit.”
Getting the ‘Runaround’
“Consumers often get the runaround between the merchant and the lender when they are unhappy with a purchase and can find themselves on the hook for payments when filing disputes, which can take weeks to resolve,” the organizations said. “With credit cards, a consumer can simply alert the credit card company and stop payment if it hasn’t already been credited. Consumers can also easily lose track of when payments are due, particularly if they have multiple outstanding BNPL loans. By contrast, credit card providers must issue regular statements that help consumers keep track of upcoming payments.”
Recommendations Made
In the letter to the CFPB, Consumer Reports and NCLC urged the Bureau to clarify that current law entitles BNPL users to additional protections already afforded to credit card users, including:
- Clear disclosure of fees and charges before account opening
- Ability to repay underwriting
- Limits on penalty fees
- Reporting to credit bureaus
- Expanded supervision of BNPL lenders