Banking and Finance Law Daily Wrap Up, CONSUMER CREDIT—D.D.C: CFPB court filing declares intent to revoke challenged ‘Buy Now, Pay Later’ rule, (Mar 28, 2025)

By Steven D. Cole, J.D.

The CFPB and the Financial Technology Association filed a joint motion to stay their pending litigation to allow the Bureau time to revoke the rule.

The Consumer Financial Protection Bureau and its Acting Director, Russell Vought, submitted a status report to the United States District Court for the District of Columbia on Mar. 26, 2025, declaring the Bureau’s intent to revoke its “Buy Now, Pay Later (BNPL) Rule.” The Financial Technology Association (FTA), a trade organization that represents the interests of the financial technology industry, had filed a complaint on Oct. 18, 2024, arguing that the Bureau’s promulgation of the BNPL Rule violated the Administrative Procedure Act (APA) and the Truth in Lending Act (TILA), was arbitrary and capricious, and constituted an abuse of discretion (see Banking and Finance Law Daily, Oct. 21, 2024). Along with the filing of the status report, the parties submitted a joint proposed order granting their motion to stay the proceedings (Financial Technology Association v. Consumer Financial Protection Bureau, No. 1:24-cv-2966-ACR (D.D.C. Mar. 26, 2025)).

Legal challenges to the rule. On May 31, 2024, the CFPB issued the BNPL Rule, effective July 30, 2024, to address the applicability of TILA to lenders that issue digital user accounts which allow to access credit, including lenders that market BNPL loans. The Rule emphasized that these lenders were also “creditors” subject to Subpart B of Regulation Z, and described how lenders meet the criteria for being “card issuers” for purposes of Regulation Z.

In its complaint, FTA asserted that the Rule’s promulgation violated the APA’s and TILA’s notice-and-comment requirements, the CFPB exceeded its statutory authority by broadly interpreting the term “credit card” to include BNPL products, and the effective date of two months after promulgation did not comply with the requirements of 15 U.S.C. § 1604(d) (stating that “any regulation of the Bureau … shall have an effective date of that October 1 which follows by at least six months the date of promulgation”). FTA further argued that the CFPB acted arbitrarily and capriciously by failing to consider how the Interpretive Rule’s new disclosure obligations were ill-fitted for BNPL products. Finally, FTA asserted that issuance of the Rule constituted an abuse of discretion by the CFPB because it was based on an improper understanding of the law; namely, because BNPL providers are not “creditors” since they do not issue “credit cards,” per the definition set forth in the CFPB’s Official Staff Commentary.

Procedural history. On Feb. 21, 2025, FTA filed a request with the court for a pre-motion conference, indicating that it intended to move for summary judgment on its challenge to the Interpretive Rule. The CFPB and Director Vought responded on February 28, 2025, requesting that the court not schedule a pre-motion conference nor set a briefing schedule while the Bureau’s new leadership reviewed the Interpretive Rule. They proposed, instead, that they submit a status report to the court by Mar. 31, 2025, regarding whether they intended to defend the Rule. In accordance with the proposal, the CFPB submitted a status report on Mar. 26, 2025, declaring its intent to revoke the challenged Rule. In the status report, the CFPB proposed to provide another status report to the court by June 2, 2025, and every 30 days thereafter, updating its progress toward revocation.

Joint motion to stay. On Mar. 26, 2025, the CFPB and FTA also filed with the court a joint proposed order granting their motion to stay the proceedings. As the CFPB explained in its status report, “[T]he Bureau’s revocation of the Interpretive Rule will moot the issues raised in this litigation. Staying this matter to allow the Bureau time to revoke the Interpretive Rule is appropriate to preserve the Court’s and the parties’ time.”

Attorneys: John R. Coleman (Herrington & Sutcliffe LLP) for Financial Technology Association. Amanda J. Krause for the CFPB.

Companies: Financial Technology Association

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