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Financial Services Law Insights and Observations

House fintech task force examines buy now/pay later industry

Federal Issues House Financial Services Committee CFPB Buy Now Pay Later Earned Wage Access Overdraft Consumer Finance Disclosures TILA Credit Report Consumer Lending Fintech

Federal Issues

On November 2, the House Financial Services Committee’s Task Force on Financial Technology held a hearing titled “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products,” urging regulators to examine the BNPL industry. The committee memorandum highlighted the rise in consumers products offered by fintechs, such as BNPL, earned wage access, and overdraft avoidance products, and warned that while these products may help consumers manage their personal cash flow, they also have the potential to create unsustainable levels of debt. FSC staff noted that many lending disclosure requirements, including those under TILA, may not apply to several of these products, thus creating concerns regarding consumers’ understanding of the associated risks. Pointing out that payments made on many of these products are not reported to credit bureaus, FSC staff raised the issue of whether consumers are missing out on opportunities to build credit.

The task force heard from several industry witnesses who discussed, among other things, current federal and state consumer protection regulations that apply to BNPL products. One witness stressed the importance of “balanced and thoughtful regulation” that benefits consumers and merchants using these new payment solutions, and noted that the industry is actively working with credit bureaus on ways to share repayment data. House Financial Services Chair Maxine Waters (D-CA) also urged the CFPB to “look[ ] deeply” at these emerging products to gain a better understanding of how they may impact low- and moderate-income consumers and borrowers of color. Representative Blaine Luetkemeyer (R-MO) noted, however, that these products “allow[] people to purchase products, [and] pay for them in a timely manner as they can afford them.” Representative Warren Davidson (R-OH) agreed, stressing that policymakers need to “avoid punishing new products for not fitting within regulatory buckets that were already built” and “should avoid overly impairing consumer choices on how they spend money.”

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