Written by: Eric Bank
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
Key Takeaways
- The Consumer Financial Protection Bureau has deprioritized enforcement of Buy Now, Pay Later under the Truth in Lending Act (TILA) and has instead gone with supervisory guidance.
- Business leaders view the action as a go-ahead signal, but consumer associations fear that it could expose economically vulnerable consumers to risk.
- Subprime lenders and fintech organizations have to balance opportunity with uncertainty of regulation and shifting political currents.
The Consumer Financial Protection Bureau said it is no longer taking enforcement actions against Buy Now, Pay Later lenders, a Trump administration policy, in a move that signals a broader trend toward deregulation.
The move is likely to have a ripple effect on the wider consumer credit industry, with guidance rather than enforcement assuming a higher priority.
In a release dated May 6, the CFPB said that although BNPL providers are continuing to be reviewed by the bureau for supervisory purposes, the Bureau no longer intends to enforce some provisions of Truth In Lending Act for now.
These include disclosure of finance charges and periodic statements — requirements that traditional credit card issuers are already mandated to observe.
The Bureau made it clear that BNPL providers are not exempt from regulation but did recognize the unique character of installment-based credit products.
Critics, some of whom are former CFPB officials, say the disclosure is diluting protections for consumers from unfair lending practices.
They point to studies that find BNPL consumers overlap with subprime borrowers — younger people and those with poor access to traditional credit — and that, without disclosures, consumers may pay late charges or overdraft charges without being fully aware of the terms.
Industry Response and Risks for Subprime Lenders
A Federal Reserve study revealed that most BNPL consumers hold balances on their revolving credit cards, and many struggle to make BNPL payments. For subprime lenders, that is both a risk and an opportunity.
Subprime lenders have exposure to new channels of customers with fewer limitations, but must also deal with the likelihood of consumer defaults.
The CFPB claims it is now focusing enforcement and supervision resources on pressing threats to consumers.
While the CFPB statement marks a cooling of enforcement, it does not shut the window on future inspections. “The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans,” said the statement.
Practically speaking, lenders that push the envelope could still face enforcement with a shift in political leadership.
Some industry participants embraced the shift. Others are wary. Subprime lenders, particularly hybrid credit product issuers, may have to exercise caution. Although federal enforcement is cutting back, state regulators and consumer suits may step into the breach and pose legal threats.
Analysts advise enhancing compliance units and being ready for a possible deceleration in 2026. The market might react with growth and creativity at this time, but long-term impacts will hinge on consumers’ performance without stringent regulation guardrails.
Is the CFPB Cutting Back or Playing a Long Game?
Some view the action as a calculated retreat. By relaxing enforcement, the Bureau may be signaling that it is watching the market and seeing what happens rather than establishing stricter guidelines.
That may give providers and policymakers time to get their best practices on the same page, or produce a patchwork of conflicting state regulations.
In both scenarios, the signal is clear: BNPL companies have some space to maneuver for the moment. But with that leeway comes accountability, and the next misstep may unleash a backlash that defines the industry for years to come.
What Should Subprime Players Do?
The subprime industry can do several things with the CFPB shift, including:
- Follow CFPB releases and state activity closely
- Improve disclosure and transparency where it is not mandated at law
- Establish contingency plans for a shift in enforcement policy
- Clearly notify consumers of the terms of repayment and penalties
BNPL is no longer new — but it is a battleground. How the industry manages to get past the current pause on regulation may determine who the victor is next time around.
