Recent years have seen the dramatic growth of Buy Now, Pay Later (BNPL), a class of unregulated fintech products that permit consumers to finance purchases by dividing payments into several interest-free installments. BNPL presents novel regulatory challenges because it is primarily marketed to consumers as an interest-free alternative to credit, and its distinctive market structure is characterized by lender–merchant agreements that promote financing at the point of sale. In the American context, the Consumer Financial Protection Bureau (CFPB) has announced plans to analogize treatment of BNPL to existing credit card regulations, which generally emphasize disclosure requirements.

Though undoubtedly an improvement over the unregulated status quo, this regulatory response is hardly a panacea to the industry’s risks, as it would not account for the crucial role that merchants play in driving the industry or the fact that consumers often do not even view BNPL as credit in the first place. This Note proposes a novel framework for the regulation of BNPL under the CFPB’s rulemaking authority to regulate actions undertaken by both lenders and merchants in promoting BNPL financing to consumers. This approach would provide the CFPB with the flexibility to ensure that regulations continue to stay abreast of developments in the market and the necessary tools to calibrate consumer financial protection to a landscape that is increasingly shaped by fintech.

The full text of this Note can be found by clicking the PDF link to the left.


On June 6, 2022, Apple unveiled plans to introduce “Apple Pay Later” in its latest iteration of iOS, 1 Press Release, Apple, Apple Unveils an All-New Lock Screen Experience and New Ways to Share and Communicate in iOS 16 (June 6, 2022), []. joining a growing number of companies hoping to capitalize on the tide of Buy Now, Pay Later (BNPL) taking the consumer finance industry by storm. 2 Companies that announced BNPL offerings in 2021 include Amazon, Microsoft, and Target. See Tara Siegel Bernard, Amazon Strikes a Deal With Affirm, the Buy-Now Pay-Later Provider, N.Y. Times (Aug. 27, 2021),
business/amazon-affirm.html (on file with the Columbia Law Review) (last updated Aug. 30, 2021); Caitlin Mullen, Microsoft Shoppers Get Another BNPL Option, Payments Dive (Dec. 10, 2021), []; Target Teams With Affirm, Sezzle for BNPL, Pymnts (Oct. 6, 2021), []. The “big five” BNPL lenders operating in the United States are Affirm, Afterpay, Klarna, PayPal, and Zip. Peter Coy, Opinion, Buy Now, Regret Later?, N.Y. Times (Dec. 19, 2022), (on file with the Columbia Law Review).
The announcement is emblematic of the dramatic growth of BNPL, a class of largely unregulated fintech 3 For a comprehensive definition of “fintech,” see Saule T. Omarova, New Tech v. New Deal: Fintech as a Systemic Phenomenon, 36 Yale J. on Reg. 735, 743–45 (2019) (defining “fintech” as an “umbrella term that refers to a variety of digital technologies applied to the provision of financial services” that share an “explicit[] promise to ‘revolutionize’ the provision of financial services . . . [b]y making financial transactions . . . faster, easier, and cheaper”). installment loans enabling consumers to finance purchases by dividing payments into a series of interest-free installments. 4 See, e.g., Julian Alcazar & Terri Bradford, Fed. Rsrv. Bank of Kan. City, The Appeal and Proliferation of Buy Now, Pay Later: Consumer and Merchant Perspectives 2 (2021), [] (comparing BNPL to traditional installment loans); see also infra section I.A.1. While BNPL has been available in the United States since at least 2012, 5 See Julia Gray, The Evolution of Buy Now, Pay Later, Retail Brew (Dec. 27, 2021), [] (explaining that Affirm began offering BNPL in 2012, with Sweden-based Klarna launching services in the United States in 2015). the industry underwent an exponential increase in popularity in the aftermath of the COVID-19 pandemic: 6 See Peter Rudegeair, Covid-19 Economy Boosts ‘Buy Now, Pay Later’ Installment Services, Wall St. J. (Dec. 30, 2020), (on file with the Columbia Law Review) (attributing the increase in BNPL usage during the pandemic in part to “[c]onsumers’ reluctance to take on new revolving debt during economic uncertainty”). The number of BNPL users in the United States doubled to 50.6 million from 2020 to 2021, 7 See Grace Broadbent, US Buy Now, Pay Later Forecast 2022, Insider Intel. (Oct. 4, 2022), []. and global BNPL spending is estimated to increase nearly 300% from 2022 to 2027. 8 See Hanneh Bareham, Has the Buy Now, Pay Later Model Changed American Spending Habits for Good?, Bankrate (Apr. 3, 2023), [] (estimating that BNPL “will reach $437 billion in 2027, driven by ‘escalating financial pressures from the rising cost of living’” (quoting Press Release, Juniper Research, Buy Now Pay Later Spend to Accelerate, Reaching Over $437 Billion Globally by 2027; Fuelled by Deteriorating Macro-Economic Factors (Oct. 25, 2022), (on file with the Columbia Law Review))).

BNPL’s unprecedented growth has forced regulators across the globe to grapple with the industry’s evasive legal structure and the risks it poses to consumers. 9 The first country to formally announce plans to regulate BNPL was the United Kingdom, which announced its intention to bring BNPL products within the regulatory purview of the country’s Consumer Credit Act in June 2022. See HM Treasury, Regulation of Buy-Now-Pay-Later Set to Protect Millions of People, Gov.UK (June 20, 2022), [] (“The government’s approach to regulatory controls . . . will tailor the application of the Consumer Credit Act . . . to these products[] and the elements of lending practice most linked to potential consumer detriment.”). Regulators in Australia and New Zealand have recently announced plans to follow suit, citing concerns that “BNPL looks like credit, . . . acts like credit, [and] carries the risks of credit.” Stephen Jones, Assistant Treasurer & Minister for Fin. Servs., Austl., Address to the Responsible Lending & Borrowing Summit (May 22, 2023), []; see also Duncan Webb, Minister of Com. & Consumer Affs., N.Z., Government Acts on Consumer Credit Protection, (Aug. 8, 2023), [] (announcing plans to regulate BNPL products under New Zealand’s Credit Contracts and Consumer Finance Act). Discussions regarding the regulation of BNPL remain ongoing in several other countries. See, e.g., Akihiro Matsuyama & Tony Wood, Buy Now Pay Later: The Regulatory Landscape in the Asia Pacific Region, Deloitte: Asia Pac. Ctr. for Regul. Strategy (May 5, 2022), [] (describing policy discussions in Hong Kong, Malaysia, and Singapore). While installment loans are hardly new, 10 See Joseph P. Jordan & James H. Yagla, Retail Installment Sales: History and Development of Regulation, 45 Marq. L. Rev. 555, 555 (1962) (detailing the growth of installment credit from 1939 to 1961); Timothy Wolters, “Carry Your Credit in Your Pocket”: The Early History of the Credit Card at Bank of America and Chase Manhattan, 1 Enter. & Soc’y 315, 318–24 (2000) (describing the development of installment-based consumer credit contracts in the first half of the twentieth century). BNPL presents novel risks because it is primarily marketed to consumers as an interest-free alternative to traditional credit offerings like credit cards. 11 See infra section II.A.2. This interest-free structure is reflected in BNPL’s distinctive profit model: Rather than relying on interest payments from consumers, BNPL lenders generate revenue by charging merchants fees on BNPL-financed trans-actions. 12 See Gordon Kuo Siong Tan, Buy What You Want, Today! Platform Ecologies of ‘Buy Now, Pay Later’ Services in Singapore, 47 Transactions Inst. Brit. Geographers 912, 918 (2022) (contrasting BNPL lenders’ focus on merchant fees with credit card providers’ focus on revolving interest). BNPL lenders advertise this arrangement to merchants as a way to increase sales and conversions, and consequently, lenders’ revenue streams depend on forming partnerships with merchants. 13 See infra section I.A.2. Thus, in addition to being a form of consumer credit, BNPL plays a secondary role as a marketing tool that merchants use to drive sales. 14 See Ron Shevlin, Buy Now, Pay Later: The “New” Payments Trend Generating $100 Billion in Sales, Forbes (Sept. 7, 2021), (on file with the Columbia Law Review) (explaining that BNPL is “an element of the marketing mix” that merchants can use to influence consumers’ likelihood of making purchases). This unique market dynamic creates incentives for both BNPL lenders and their partnering merchants to encourage consumers to increase their spending with BNPL. 15 See generally Lauren Ah Fook & Lisa McNeill, Click to Buy: The Impact of Retail Credit on Over-Consumption in the Online Environment, Sustainability, Sept. 7, 2020, at 1, 10, [] (characterizing the BNPL paradigm as a reconceptualization of consumer credit that severs the traditional association between credit and debt to promote spending). This has led to concerns that BNPL may impair consumers’ financial health by promoting overspending and impulsive buying. 16 See infra section II.A.1. These risks are compounded by lenders’ tendency to represent BNPL as a sensible budgeting tool rather than properly describing it as a form of credit. 17 See Rachel Aalders, Buy Now, Pay Later: Redefining Indebted Users as Responsible Consumers, 26 Info. Commc’n & Soc’y 941, 945 (2023) (arguing that BNPL lenders market their products as “morally superior to credit cards, which they position as . . . either predatory . . . [or] exclusionary”); Tan, supra note 12, at 913 (“[T]he positioning of BNPL as a lifestyle and a fashionable way to pay is deployed to obscure the underlying debt–credit relations forged between the BNPL firm and the user.”).

Although the consumer risks accompanying the failure to regulate BNPL have garnered significant academic attention internationally, 18 The proliferation of BNPL has garnered particular attention in Australia. See, e.g., Julia Cook, Kate Davies, David Farrugia, Steven Threadgold, Julia Coffey, Kate Senior, Adriana Haro & Barrie Shannon, Buy Now Pay Later Services as a Way to Pay: Credit Consumption and the Depoliticization of Debt, 26 Consumption Mkts. & Culture 245, 246 (2023) (drawing on “an analysis of BNPL websites and apps, a walking ethnography of a large shopping centre in Newcastle, Australia, and interviews with BNPL customers”); Paul Gerrans, Dirk G. Baur & Shane Lavagna-Slater, FinTech and Responsibility: Buy-Now-Pay-Later Arrangements, 47 Austl. J. Mgmt. 474, 475 (2022) (relaying the ongoing debate as to whether BNPL products should be considered “credit” under Australia’s National Credit Act); Jacob Rizk, Use Now, Regulate Later? The Competing Regulatory Approaches of the Buy-Now, Pay-Later Sector and Consumer Protection in Australia, 10 Victoria Univ. L. & Just. J. 77, 79–80 (2021) (“This explosive growth [of BNPL] has posed an issue to Australia’s financial regulators: how to best balance assertive regulatory action to protect consumers and ensure market stability without stifling innovation.”); Di Johnson, John Rodwell & Thomas Hendry, Analyzing the Impacts of Financial Services Regulation to Make the Case that Buy-Now-Pay-Later Regulation Is Failing, Sustainability, Feb. 12, 2021, at 1, 3–4, [] (discussing regulatory considerations in Australia); Elizabeth Boshoff, David Grafton, Andrew Grant & John Watkins, Buy Now Pay Later: Multiple Accounts and the Credit System in Australia 2–3 (Oct. 15, 2022), [] (unpublished manuscript) (describing Australian consumers’ use of BNPL). Outside of Australia, BNPL has also been subject to extensive academic treatment in Asia and Europe. See, e.g., Della Ayu Zonna Lia & Salsabilla Lu’ay Natswa, Buy-Now-Pay-Later (BNPL): Generation Z’s Dilemma on Impulsive Buying and Overconsumption Intention, 193 Advances Econ. Bus. & Mgmt. Rsch. 130, 133 (2021) (Indonesia); Lachlan Schomburgk & Arvid Hoffman, How Mindfulness Reduces BNPL Usage and How That Relates to Overall Well-Being, 57 Eur. J. Mktg. 325, 326 (2023) (European Union); Benedict Guttman-Kenney, Chris Firth & John Gathergood, Buy Now, Pay Later (BNPL) . . . On Your Credit Card, 37 J. Behav. & Experimental Fin., no. 100788, 2023, at 1, 1 (United Kingdom); Allen Sng Kiat Peng & Christy Tan Muki, Buy Now Pay Later in Singapore: Regulatory Gaps and Reform 2 (Apr. 1, 2022), [] (unpublished working paper) (Singapore). there is currently a gap in the literature regarding regulatory considerations in the American context. This gap is important in light of the unique features of the American regulatory scheme, which has been largely constructed through intermittent, politically polarized responses to regulatory crises 19 See Lisa Kastner, Tracing Policy Influence of Diffuse Interests: The Post-Crisis Consumer Finance Protection Politics in the US, 13 J. Civ. Soc’y 130, 134–38 (2017) (describing theories regarding the influence of diffuse interest groups in formulating regulatory responses to crises); Kathryn C. Lavelle, Constructing the Governance of American Finance: Timing and the Creation of the SEC, OTS, and CFPB, 29 J. Pol’y Hist. 321, 322 (2017) (arguing that financial crises have historically given rise to a two-stage regulatory response in which the federal government first exercises its emergency powers to temporarily prevent widespread insolvency and then restructures the regulatory system); see also Saule T. Omarova & Margaret E. Tahyar, That Which We Call a Bank: Revisiting the History of Bank Holding Company Regulations in the United States, 31 Rev. Banking & Fin. L. 113, 193–98 (2011) (describing the complexities of enacting regulatory reform in the context of American financial markets). and has only recently consolidated consumer financial protection into a single federal agency. 20 See infra section I.B.2. Moreover, the outsized role of nonfinancial partnering merchants in promoting BNPL to consumers calls into question the efficacy of extending existing financial regulations—which have historically focused on financial and depository entities 21 See infra section I.B.1. —solely to BNPL lenders.

Against this backdrop, on September 15, 2022, the CFPB issued its long-anticipated report on the industry, 22 Martin Kleinbard, Jack Sollows & Laura Udis, CFPB, Buy Now, Pay Later: Market Trends and Consumer Impacts 1, 3–5 (2022), [] [hereinafter September Report]. announcing that it was looking into extending existing credit card regulations to BNPL lenders. 23 Rohit Chopra, Dir., CFPB, Prepared Remarks on the Release of the CFPB’s Buy Now, Pay Later Report (Sept. 15, 2022), [] [hereinafter Chopra, September Remarks] (explaining that the CFPB will “identify potential interpretive guidance or rules to issue with the goal of ensuring that Buy Now, Pay Later firms adhere to many of the baseline protections that Congress has already established for credit cards”); see also infra section II.B. While this development certainly signals an improvement over not regulating lenders at all, this Note argues that the analogy to credit cards is fundamentally flawed because existing credit card regulations—which largely rely on disclosure requirements 24 See, e.g., Ronald J. Mann, Charging Ahead: The Growth and Regulation of Payment Card Markets 159–65 (2006) (explaining the role of disclosure in credit regulation). For a critique of the assumptions underlying the present preference for disclosure, see Hosea H. Harvey, Opening Schumer’s Box: The Empirical Foundations of Modern Consumer Finance Disclosure Law, 48 U. Mich. J.L. Reform 59, 105–09 (2014) (arguing for a shift toward evidence-based policymaking). —would fail to account for the crucial role that merchants play in driving the industry 25 See infra section II.C.2. and the fact that many consumers do not even view BNPL as credit. 26 See infra section II.C.1. Moreover, by focusing on the similarities between BNPL and traditional credit products, this approach risks failing to keep up with the industry’s rapidly evolving landscape, characterized by market activities that frequently elude traditional legal classifications. 27 See infra section II.C.3.

This Note contributes to the literature of consumer finance law by describing the deficiencies in existing regulatory approaches and proposing a novel framework for the regulation of nonfinancial market participants. Part I provides an overview of the BNPL industry and contextualizes regulatory considerations by tracing the historical evolution of federal consumer protection law through the creation of the CFPB. Part II describes the risks that unregulated BNPL products pose to consumers and argues that the CFPB’s proposal to extend existing credit card regulations to BNPL lenders is unlikely to sufficiently respond to these risks. Part III explains the important function that regulating merchants can have in creating a comprehensive regulatory scheme for BNPL and addresses some challenges in constructing such a framework. The Note concludes by proposing a framework for regulating representations and activities undertaken by merchants offering BNPL to customers under the CFPB’s statutory authority to proscribe unfair, deceptive, or abusive acts or practices (UDAAPs) under the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). 28 12 U.S.C. § 5531 (2018).