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NAFCU writes to CFPB regarding BNPL products
NAFCU Regulatory Affairs Counsel James Akin wrote to the CFPB Friday in response to the Bureau’s request for comment (RFC) regarding its inquiry into providers of buy now pay later (BNPL) products. Particularly, Akin wrote on behalf of members having “serious concerns regarding the utilization of ‘Pay in 4’ loans by unsupervised fintech companies.”
Specifically, Akin outlines potential risks of the Pay in 4 model including the inability of consumers to build credit and risk of damage to their credit scores, the outsized use of BNPL by consumers in poor financial health, the misleading marketing and inadequate disclosures resulting in unexpected fees, and the lack of transparency regarding use of consumer data.
“NAFCU requests that the Bureau release a comprehensive report regarding its findings from the December market monitoring orders and this RFC,” wrote Akin. “Furthermore, to the extent that these findings reflect a deliberate intent on the part of ‘Pay in 4’ BNPL providers to circumvent regulation and target financially vulnerable consumers, NAFCU urges the Bureau to take steps to ensure that these unregulated lenders institute adequate consumer protection practices.
In addition to requesting the Bureau engage in consumer education regarding the potential risks associated with “Pay in 4” products, Akin also requested that the Bureau consider several updates to Regulation Z that would level the playing field in the BNPL market to increase the availability of consumer credit while maintaining consumer protections.
“The addition of more credit unions, with their culture of compliance and consumer protection, to the BNPL market, can only serve to improve the standards and practices of BNPL as a whole,” stated Akin.
Read the full letter here. NAFCU recently published a Regulatory Alert and an insight post on the NAFCU Networks engaging with credit unions regarding recent litigation involving BNPL products. The association will continue to keep credit unions informed of relevant updates from the CFPB via the NAFCU Today.
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