On August 2, members of U.S. House of Representatives introduced H.J. Res. 195, a joint resolution providing for congressional disapproval under the Congressional Review Act (CRA) of recent CFPB guidance (previously discussed here) on buy now pay later (BNPL) lending. The Bureau’s guidance applied TILA protections previously reserved for credit card issuers, to BNPL lenders.
In the CFPB’s BNPL guidance, the Bureau concluded that BNPL operates similarly to conventional credit cards and thus fits the regulatory definition of "credit cards" under Regulation Z. See 12 CFR 1026.2(a)(15)(i). Furthermore, BNPL lenders are classified as “card issuers” and “creditors.”
According to the CFPB interpretive rule, BNPL lenders are required to:
- Investigate disputes. BNPL providers must investigate disputes initiated by consumers. During these investigations, they must pause payment requirements and, in some cases, issue credits.
- Refund returned products or cancelled services. When consumers return products or cancel services for a refund, BNPL providers must credit the refunds to consumers’ accounts.
- Provide billing statements. Consumers must receive periodic billing statements similar to those provided for traditional credit card accounts.
If passed, the CRA measure would undo the recent CFPB BNPL lending interpretive rule.
The CRA allows lawmakers a period of time to overturn new regulations and certain informal rules issued by federal agencies. To utilize this mechanism, both the U.S. House and Senate must pass a joint "resolution of disapproval" targeting the specific rule. These resolutions can pass with simple majority votes but can be blocked by a presidential veto. While a veto can be overridden, the political and practical challenges in doing so make this prospect unlikely. Lawmakers argue that, at a minimum, the CFPB should allow the industry more time to prepare for the changes by delaying implementation of the guidance until October 2025.
Putting It Into Practice: The House Resolution is the most recent development in the ongoing battle over how the budding BNPL industry should be regulated (previously discussed here, here, and here). Given the political dynamics in the House and Senate, this resolution is unlikely to pass. Nonetheless, as the regulatory outlook of the BNPL industry continues to evolve and take shape, industry players should keep an ear to the ground.