/regulation & compliance

News and resources on regulation, compliance, legal and governance issues for banks and fintechs.

Klarna labels CFPB BNPL rule 'baffling'

The US Consumer Financial Protection Bureau's new rule on buy now, pay later lenders has received a mixed reception from industry players, with Affirm welcoming the outcome but rival Klarna calling it "baffling".


Klarna labels CFPB BNPL rule 'baffling'


This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

The CFPB published its interpretive ruling yesterday, declaring that BNPL lenders should be treated in the same way as credit cards.

This means that providers must give consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a buy now, pay later loan.

Affirm says it is "encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, to provide greater choice and transparency for consumers".

Klarna also says it welcomes "proportionate" regulation and that the new rule does not require any major changes to its business.

However, the Swedish firm also argues that "trying to regulate BNPL like a credit card is like comparing apples with oranges. So today’s announcement is confusing".

The company notes that other countries, such as the UK and Australia, have recognised the "fundamental differences" between the two products.

Says a statement: "It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways."

Sponsored [Webinar] Creating a Seamless Banking App Experience

Comments: (3)

Conny Dorrestijn NED and Fintech Entrepreneur at Augmentum Fintech plc

Dear Klarna - if those 'differences are so fundamental' why not clarify this clearly in your statement?

Hitesh Thakkar Technology Evangelist (Financial Technology) at SME - Fintech startups (APAC and Africa)

CFPB is viewing BNPL as product purchase on EMI linked to Credit Card so what's wrong in it? 

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

A big market segment of BNPL is Ultra Sub Prime. A majority of BNPL users are unlikely to qualify for a credit card. Besides, even when a BNPL user repays her EMIs on time, it will ding her credit score because of how credit score systems are designed.

So viewing BNPL as credit card purchase against installments betrays fundamental lack of understanding of the nuances of the two products.

[On-Demand Webinar] Payments Modernisation: What are Financial Institutions prioritising?Finextra Promoted[On-Demand Webinar] Payments Modernisation: What are Financial Institutions prioritising?