CFPB Plans to Revoke Buy Now, Pay Later Rule Fintechs Fought (1)

The Consumer Financial Protection Bureau plans to revoke an interpretive rule bringing some credit card protections to buy now, pay later products, the agency and a fintech trade group that sued to block the rule said in a court filing.

The Financial Technology Association and the CFPB asked Judge Ana C. Reyes for a stay in the litigation while the agency moves to eliminate the rule, according to a joint status report filed Wednesday in the US District Court for the District of Columbia. The CFPB said it would provide its next report on progress toward revoking the rule by June 2 and every 30 days thereafter.

Buy now, pay later providers Block Inc., Klarna Bank AB, PayPal Holdings Inc., and Zip Co. are among the FTA’s members.

“This interpretive rule was deeply flawed, seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without legislative authority and without a clear and proper understanding of the unique nature of the product,” FTA President and CEO Penny Lee said in a statement.

The CFPB didn’t immediately respond to a request for comment.

The CFPB’s interpretive rule, released in May 2024, said buy now, pay later companies are governed by some credit card provisions in the 1968 Truth in Lending Act. That means they must provide customers with regular billing statements, investigate disputes, and offer refunds for returned products and canceled services.

The Financial Technology Association filed its lawsuit in October, arguing the CFPB didn’t take required steps under the Administrative Procedure Act when it issued the interpretive rule.

Buy now, pay later products exploded in popularity with the use of e-commerce during the Covid-19 pandemic. The loans allow customers to split up purchases, typically into four equal payments.

The interpretive rule went into effect July 30, but the CFPB gave companies more time to comply. The agency said in an August blog post it would give companies a grace period before enforcing it while the industry is “transitioning into compliance in a good faith and expeditious manner.”

The CFPB added that it expected other federal and state regulators to do the same—and that the industry was “responding favorably and constructively” to the rule.

Buy now, pay later providers say the CFPB is attempting to shoehorn their products—no-interest, closed-end loans payable in equal chunks—into rules for open-ended credit card loans that carry interest rates.

House Republicans filed a resolution (H. J. Res. 195) in August to repeal the rule using the Congressional Review Act. The measure failed to move in the House and no parallel legislation was filed in the Senate.

Orrick, Herrington & Sutcliffe LLP represents the Financial Technology Association.

The case is Financial Technology Association v. Consumer Financial Protection Bureau, D.D.C., No. 1:24-cv-02966, Status Report and Joint Motion to Stay 3/26/25