By FOCUS, A Leonine Business
Buy Now, Pay Later (BNPL) loans have quickly become a popular payment method for online and in-store purchases. The products offer consumers short-term installment plans at checkout, often interest-free. Typically, a quarter of the price is paid as a down payment followed by three payments every two weeks for the next six weeks. BNPL has surged in popularity, but with growth comes scrutiny, and state lawmakers are starting to take notice.
In a report published in January 2025, the Consumer Financial Protection Bureau (CFPB) found that more than one-fifth of consumers with a credit record used BNPL loans in 2022. Most of the consumers taking out BNPL loans had subprime or deep subprime credit scores. The bureau’s report also found that BNPL borrowers were more likely to hold higher balances on other credit accounts, such as personal loans, student loans or credit cards.
BNPL providers typically avoid classification as traditional lenders, allowing them to sidestep key consumer protection regulations. As usage grows, so do concerns about overextension of credit, lack of transparency and the absence of credit reporting. In response, several states have considered legislation that would formally regulate BNPL transactions.
In 2024, the CFPB issued a rule declaring that BNPL loans would be treated as credit cards under Regulation Z. This rule required BNPL lenders to provide consumers with certain legal protections, including a right to dispute charges and demand a refund after returning a product purchased using a BNPL product. Shortly after Republican President Donald Trump took office in 2025, the bureau announced its plans to revoke its BNPL rule and declared that it would no longer prioritize enforcement of the rule. With the federal government leaving the BNPL industry unregulated, states are stepping in to fill the gap.
On May 8, New York Democratic Governor Kathy Hochul signed AB 3008/Chapter 58 into law. The massive budget bill includes a licensing requirement for BNPL companies and subjects BNPL loans to the state’s 16 percent interest rate cap. Massachusetts considered similar legislation last session, with bills that would have created licensure and disclosure requirements for BNPL products. Those bills, however, died and have not yet been reintroduced in 2025.
With the CFPB stepping back from BNPL oversight, state legislatures are increasingly taking the lead in shaping policy for this fast-growing sector. As more states explore licensing requirements, interest rate caps and disclosure mandates, the future of BNPL will likely be determined at the state level. FOCUS will continue to monitor the development of BNPL regulation in state legislatures across the country.
by Will Beacom 5/27/25
