The new Consumer Financial Protection Bureau rule putting buy now, pay later providers in the same category as credit card issuers can fuel the industry’s growth, experts say. 

The rule, published May 22 to take effect 60 days later, “makes the model more sustainable because [BNPL] has been around for a long time, it has been digitized, it’s faster and slicker,” Nathan Hilt, managing director and payments expert at business consulting firm Protiviti, told Bank Automation News.

The regulation, which was “anticipated and not revolutionary,” will help the BNPL product mature, a natural progression in the financial services industry, Hilt said. 

BNPL lenders will be regulated like credit card providers under the rule and will have to provide: 

• Dispute investigation; 
• Credit disclosures when an account is opened with a BNPL provider; 
• Billing statements; and 
• Refunds on returned products or canceled services. 

“Regulations that prioritize the consumer’s best interests and improve transparency are generally good for the sector and will strengthen it over time,” Chief Executive Arad Levertov, of BNPL provider Sunbit, told BAN. 

The ruling has some similarities to 2019 CFPB regulations on prepaid cards that helped grow the industry by “having people understand” the offering, Hilt said. 

Improving users’ understanding of the product “could be a catalyst to continue to grow and build on the maturity curve that it’s on,” he said. 

BNPL payment volume in the U.S. was $71.93 billion in 2023 compared with $60 billion in 2022, a 19% increase, according to a March 6 report by think tank eMarketer. 

While BNPL service continues to grow and attract sticky users, Hilt expects at some point “there’s going to be some consolidation in the industry.” 

Gearing up for new rule

The new rule is expected to spur operational changes at BNPL providers, such as making “investments in their refund and chargeback capabilities,” Todd Pollak, chief revenue officer at Marqeta, told BAN. BNPL providers will be required to investigate consumer disputes, pause payment requirements during investigations and issue credits, if necessary, he said. 

“BNPL providers will need robust procedures and systems to address disputes and refunds efficiently,” Pollak said. 

Card issuer Marqeta works with BNPL providers including Klarna, Affirm, Afterpay and Sezzle, according to the company’s website. 

While BNPL providers will be in the same regulatory category as credit cards, they will be regulated slightly differently, Pollak said. 

“The CFPB has clarified that certain requirements for traditional revolving consumer credit cards do not apply to BNPL providers,” Pollak said. The rule places limits “on penalty fees and imposes particular considerations of the borrower’s ability to repay.”