WASHINGTON—The Office of the Comptroller of the Currency (OCC) has issued mew guidance to national banks and federal savings associations to address what it said are the risks associated with “buy now, pay later” lending.
According to the OCC, the guidance focuses on the risk management of buy now, pay later (BNPL) loans, which are payable in four or fewer installments and carry no finance charges. The guidance notes that banks should maintain underwriting, repayment terms, pricing, and safeguards that minimize adverse customer outcomes and should ensure that marketing materials and disclosures are clear and conspicuous.
In addition, prudent BNPL lending should include safeguards that minimize adverse customer outcomes, the OCC said.
“Supporting a fair and inclusive financial system is a priority for the OCC and is critical to maintaining trust in the banking system,” said Acting Comptroller Michael Hsu. “As the buy-now-pay-later market grows and we enter the holiday shopping season, the guidance confirms our expectation that OCC-supervised institutions offering these products do so in a responsible manner.”
What’s Expected
The OCC said it expects banks that offer BNPL loans to do so in a manner that is safe and sound, provides fair access to financial services, supports fair treatment of consumers, and complies with applicable laws and regulations.
The guidance can be found here: OCC Bulletin 2023-37, “Retail Lending: Risk Management of ‘Buy Now, Pay Later’ Lending”
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