Consumer use of “buy now, pay later” (BNPL) products and programs has proliferated over the last few years. While federal oversight has not been extensive to date, new guidance from the Office of the Comptroller of the Currency (OCC) likely signals heightened attention and may be the precursor to more enforcement or supervisory developments. In addition to the OCC, the CFPB has been examining BNPL products over the last few years and is continuing to examine the applicability of consumer financial laws to BNPL products.
The OCC does not criticize BNPL activities, noting that if BNPL products are used responsibly, they “can provide consumers with a low-cost, short-term, small-dollar financing alternative to manage cash flow.” Rather, the guidance highlights the risks associated with providing BNPL products—for both banks and consumers—and offers guidance to mitigate them.
The guidance is directed to all banks, including community banks, under the OCC’s supervision that offer BNPL products.
Covered BNPL Products
While BNPL products come in different forms, the guidance is focused on BNPL products that are payable in four or fewer installments and carry zero percent interest and no…
