WASHINGTON—Responding to a request from the Consumer Bankers Association, the CFPB stated in a letter to the organization that it intends to develop plans for a rulemaking to define larger participants in the personal loan/buy now, pay later (BNPL) market.
In the letter to the CBA signed by CFPB General Counsel Seth Frotman, the agency noted it has a “statutory obligation” to ensure that Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition.
“The CFPB has supervisory authority over both nonbanks and very large banks in most segments of consumer lending – including mortgages, auto finance, and private education loans – but not the entirety of the personal loan market, where the CFPB generally only has supervisory authority over large banks and nonbank payday lenders. Banks provide a substantial portion of the personal loans in the United States, in the form of credit cards, but as your petition notes, there is a large nonbank segment of the personal loan market consisting of 85 million accounts and over $125 billion in outstanding balances,” Frotman wrote.
“Your concerns about the existence of an unlevel playing field in the market for personal loans have merit. In particular, banks that offer credit cards and nonbanks that offer payday loans (including traditional payday loans or online or app-based payday loans that are sometimes marketed as “earned wage” products) are subject to CFPB supervision, while other nonbanks in the personal loan market (e.g., Buy-Now-Pay-Later and installment lenders) generally are not. While the CFPB is already supervising certain nonbank participants in this market utilizing other authorities, after considering your petition and the responsive comments, we intend to develop a proposed rule as suggested by your petition,” Frotman concluded.
America’s Credit Unions requested additional regulation of BNPL providers in a letter sent to the Bureau in August, and its legacy organization requested such a rulemaking dating back to 2022, ACU noted.