Although an interpretive rule that made Buy Now Pay Later (BNPL) services subject to the Truth in Lending Act has been withdrawn, the issue remains a flashpoint in the industry and among policymakers, according to the Congressional Research Service (CRS).
“Whether BNPL providers should be subject to the Truth in Lending Act (TILA, 15 U.S.C. §1601 et seq.) is one of the key issues policymakers have debated,” CRS said, in a report.
And, CRS said, controversy surrounding the rule is just one of several BNPL issues confronting policymakers.
CRS said that the most popular form of BNPL is known as “Pay in 4,” in which a consumer generally pays 25% of the total cost up front for a purchase and makes the remaining three payments in equal two-week increments. CRS noted that, according to the CFPB, Pay in 4 originations have increased tremendously, from $2.2 billion in 2019 to $43.9 billion in 2023. CRS then estimated growth to $63.3 billion in 2025.
The interpretive rule, issued by the Biden Administration, concluded that certain BNPL programs involved “digital user accounts” and that those digital user accounts were “credit cards,” making the BNPL providers “card issuers.”
As a result, many BNPL providers were subject to many of Regulation Z’s open-end credit provisions. These Regulation Z requirements included account-opening disclosures, billing statements, change in terms disclosure, payment processing, treatment of credit balances, issuance of cards, liability for unauthorized use, merchant disputes, billing disputes, crediting of returns, advertising, and, as the CFPB noted in a footnote, potentially application and solicitation disclosures.
CRS said the reaction to the interpretive rule was mixed. Some industry proponents argued that such requirements under TILA were unnecessary, since the industry had already implemented many of the protections, including the ability to dispute charges and disclosures on the cost of credit.
Certain consumer advocate groups alleged that consumers did not have clear legal rights, suggesting that the interpretive rule was needed.
In May 2025, Acting CFPB Director Russell Vought withdrew the interpretive rule, which also was being challenged in the U.S. District Court for the District of Columbia by the Financial Technology Association. The decision was made at a time when the Trump Administration was rolling back many of the Biden Administration’s regulatory initiatives.
When the Trump Administration withdrew the rule, officials said they would not issue a new one.
However, CRS said that issues surrounding BNPL remain. “Other policy debates relate to how BNPL relates to broader consumer debt, incorporation of BNPL in credit scores, and data visibility,” CRS said. “These include the degree to which BNPL products may encourage increased spending by consumers.”
In addition, CRS said that credit furnishing by BNPL firms remains inconsistent. Only one major firm universally furnishes Pay in 4 data to credit bureaus, even as certain credit scoring models are increasingly capable of using and scoring such data, CRS said.
“While BNPL today remains a minority of total consumer volume for payments, a lack of central data collected on the BNPL may present risks to policymakers attempting to assess overall risks of the product if it continues to grow,” CRS said.
Several bills that would affect BNPL have been introduced during the past two Congresses. Reviewing legislation introduced in the 118th Congress and the current Congress, CRS said that bills have been introduced that would:
- Address TILA’s applicability to Pay in 4.
- Require a study of BNPL and credit reporting.
- Limit Pay in 4 payments for semiautomatic weapons.
- Require a study of the financial effects of BNPL on military members.
States also have imposed specific and differing regulations for BNPL companies. A wide range of states have long-standing license and other obligations for consumer loans generally and they may or may not apply to BNPL products, CRS said. Some states are moving towards specific licenses and disclosure obligations for BNPL providers. For example, New York enacted the Buy Now Pay Later Act in 2025, and the New York Department of Financial Services published a proposed rule implementing the Act.
Violations of various state rules and laws have triggered consent agreements or settlements against BNPL providers. And, in December 2025, seven state attorneys general sent letters to BNPL providers requesting more information about their business practices to determine if the companies are complying with consumer protection laws. Finally, observing the increasing popularity of current Pay in 4 and BNPL options and their potential movement into health care, rental housing, and other sectors of the economy, CRS concluded that interest in their “regulatory treatment, as well as other policy issues [it had noted]—such as associated debt levels, consumer indebtedness, and relevant protections—also have the potential to intensify.”