Regulating Buy Now, Pay Later : Consumer Financial Protection in the Era of FinTech

The last few years have given rise to the dramatic growth of Buy Now, Pay Later (BNPL), a class of largely unregulated Fintech installment loans that enable consumers to finance purchases by dividing payment into a series of interest-free installments. BNPL presents novel regulatory challenges with regard to risks posed to consumers because it is marketed as an interest-free alternative to credit, with a unique market structure characterized by lender-merchant agreements to promote financing at point of sale. As regulators across the globe grapple with the current gap in regulatory treatment, in the United States, the Consumer Financial Protection Bureau (CFPB) has announced plans to analogize treatment of BNPL to existing regulations on credit cards, with a corresponding emphasis on disclosure and credit reporting requirements. Though surely an improvement over the industry’s unregulated status, analogous regulatory treatment is inaccurate because it fails to account for the crucial role that merchants play in driving the industry and the divergent manner in which many consumers, who do not even think of BNPL as traditional credit, perceive these offerings. This Note proposes a novel framework for the regulation of BNPL and other Fintech products, under which the CFPB can harness its broad rulemaking authority under Dodd-Frank to regulate actions undertaken by merchants and lenders alike in promoting BNPL to consumers. Such an approach could provide the CFPB with the flexibility to ensure that regulations continue to stay abreast with developments in the market, along with the necessary tools to calibrate consumer financial protection to a landscape that is increasingly shaped by Fintech