As the Consumer Financial Protection Bureau (CFPB) nears the end of its comment period on possible “buy now, pay later” regulation, Affirm on Friday (July 26) filed a detailed response arguing for tweaks that it says would better accommodate the unique aspects of BNPL products.
The CFPB’s proposed interpretive rules under the Trade in Credit Insurance Act (TILA) and Regulation Z are intended to extend consumer protection measures similar to those in traditional credit cards. Affirm’s filing supports the CFPB’s intent to strengthen consumer protection measures, while urging the CFPB to adjust its regulatory approach to avoid consumer confusion and excessive compliance challenges.
Other BNPL companies have called for more time to prepare before the new rules, which go into effect on Tuesday (July 30), are due to take effect on Thursday. The CFPB is accepting comments on the rules until Thursday.
In the company’s letter regarding the CFPB ruling, Affirm Chief Legal Officer Katherine Adkins wrote: “Affirm was founded to provide an alternative to credit cards and to build the first payments platform with a moral foundation and a consumer-first mindset. Affirm’s vision is to be as pervasive, secure and convenient as traditional payments networks, but far more transparent, honest and consumer- and merchant-centric.”
Adkins added: “Our solutions are built on trust and transparency, allowing consumers to shop responsibly and with confidence.”
Affirm is pushing the CFPB to reassess its proposed rules on pay later loans, saying it wants the bureau to create specific rules for BNPL products rather than apply existing credit card regulations.
“Requiring BNPL providers to follow the rules for open-end credit cards would create compliance challenges and confusing outcomes for consumers,” Adkins said in the letter. “The actual information Affirm would be required to include in its account opening disclosures would likely be largely unhelpful and confusing.”
Affirm is seeking the following key changes, including exemptions from certain disclosure requirements for BNPL providers, clarification on the timing and content of periodic statements, and the removal of irrelevant statement elements. The company argues that regulation tailored to BNPL would reduce consumer confusion and compliance burdens for the industry.
The company argues that existing regulatory frameworks designed for open-ended credit products like credit cards are not suited to BNPL products: for example, it says current disclosure requirements contain elements that are unrelated to BNPL.
Additionally, Affirm said it only provides applications upon request and does not engage in unsolicited applications.
With regards to periodic statements, Affirm points out that the assumptions of the open-end credit model are not consistent with the BNPL structure. Each BNPL loan stands on its own and does not accrue interest like credit card balances. Affirm recommends monthly statements that reflect related loan activity, such as new loans and payments, as well as adjustments to the content of periodic statements.
Read more about: Affirm, BNPL, Pay Later, CFPB, Consumer Financial Protection Bureau, credit, credit cards, trending news, lending, loans, news, PYMNTS News, regulation, retail, Truth in Lending Act
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