The Consumer Financial Protection Bureau (CFPB) announced Wednesday that shoppers using buy-now, pay-later (BNPL) products are covered by some federal safeguards similar to those for traditional credit cards. This is the agency's first-ever guidance aimed at this fintech-heavy financing field.

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CFPB Buy-Now, Pay-Later Guidance

The CFPB's guidance, issued as an interpretive rule, states that BNPL firms qualify as credit card providers under federal law, specifically the Truth In Lending Act (TILA). This means they must extend certain credit card-like protections to consumers.

These protections include the right to dispute purchases and receive refunds for returned items. Consumers must also receive regular billing statements showing how much they owe on their BNPL loans.

CFPB Director Rohit Chopra emphasized the importance of consistent business practices for consumers using BNPL options. "When consumers check out and choose buy now, pay later, they don't know if they will get a refund if they return their product or whether the lender will help them if they didn't get what was promised," Chopra said. "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."

BNPL financing, offered by firms like Affirm and Klarna, allows consumers to spread the cost of a purchase over several interest-free payments. The growth of e-commerce, particularly during the pandemic, has turned BNPL credit into a booming, multibillion-dollar market.

The CFPB's new guidance follows a 2022 report that identified a lack of uniform disclosures and other gaps in consumer protections within the BNPL market. The agency is now working to ensure BNPL providers adhere to more credit-card-like standards.

The CFPB will accept public comments on Wednesday's guidance to determine if further clarifications or revisions are needed. "Given the growth in outstanding consumer credit and the rise in new forms of credit, we're going to continue to carefully monitor these markets and take action to ensure that consumers are being treated fairly," Chopra told reporters.