New York Regulators Revisit Buy Now Pay Later Rules

New York financial regulators are in talks with buy now, pay later (BNPL) providers and other stakeholders to develop new industry rules, after facing backlash over a recently introduced regulation.

In early May, Governor Kathy Hochul enacted the “first of its kind”  New York BNPL Act, which requires BNPL providers to obtain a state license and comply with new disclosure and business practice standards.

Even though the BNPL industry has faced growing regulatory attention in recent years, this act marks the first state law to impose product-specific licensing requirements and broad regulatory standards tailored to BNPL loans.

For example, the act limits the interest and fees on point-of-sale installment financing classified as “loans.” However, BNPL providers have pushed back, arguing their services shouldn’t be regulated under the same rules as credit card lending.

The New York law also mandates that BNPL companies establish a framework for managing unauthorized charges and resolving disputes within the state.

In addition, it requires state-chartered banks to secure written approval from New York regulators before offering certain types of BNPL loans.

The act applies to anyone who “offers” a BNPL loan to consumers, either by directly extending credit or by running a platform primarily designed to enable third parties to offer BNPL loans.

The act is designed to introduce clear guardrails for the BNPL industry to ensure greater transparency around credit reporting, disclosure, and fees.

But with providers raising concerns about the bill, regulators are now seeking to collaborate with the industry and other authorities as they move forward with rulemaking.