Banking and Finance Law Daily Wrap Up, STATE BANKING LAWS—CRL applauds New York BNPL Act, recommends further changes, (Sep 16, 2026)

By A. Bryan Gerepka

The group said New York’s regulations set a strong example for other states and fill gaps left by limited federal oversight.

While New York’s Buy-Now-Pay-Later (BNPL) legislation contains strong consumer protections, further refinements are needed to protect financially vulnerable consumers. The Center for Responsible Lending (CRL) expressed that view in a comment letter sent to the New York State Department of Financial Services (NYDFS), as the agency finalizes implementing regulations for the state’s “Buy-Now-Pay-Later Act".

In the Sept. 14, 2026, comment letter, CRL urged the agency to take advantage of its “broad mandate” under Section 747(1) of the Act to “further protect and benefit consumers.” The group pointed to language in Section 747(1), which states the Superintendent may promulgate rules “appropriate to implement the provisions of this article, protect consumers, and ensure the solvency and financial integrity of buy-now-pay-later lenders.”

Recommendations. The CRL recommended the following:

1. Enhanced reporting requirements. The law should require providers to publicly release detailed, disaggregated data about the full scope of BNPL usage, as this would assist in filling in gaps in information. Examples may include, but should not be limited to, outcomes for BNPL borrowers, such as data on the amount of fees paid for late payments, incidence of extended payment plans, and subscription usage.

2. Ease of subscription cancellation. Providers should ensure cancellation is simple and easily accessible, especially since Pay in Four providers frequently offer subscriptions that allow access to various products and other services.

3. Application of existing laws to BNPL. Pre-existing credit, debt collection, consumer, or other laws beyond the Act should be applied to BNPL. For example, regulators should carefully evaluate whether various fees charged are finance charges under the law, including subscription fees, and whether 0% interest products reflect the true Annual Percentage Rate (APR) charged.

4. Fair lending. NYDFS should examine BNPL providers for compliance with state and federal fair lending laws.

Background. In 2025, New York passed the BNPL Act and the NYDFS began developing implementing regulations, especially around data collection, privacy, and disclosure. In February 2026, the agency made key refinements, such as banning tips, requiring underwriting transparency, restricting data use for product improvement without separate consent, and giving consumers more control over payment allocation. The comment period ends in September 2026, at which time the final regulations are expected to take effect.

CRL called the changes included in the final regulations “necessary and appropriate.” Specifically, the Act and its implementing regulations address documented issues raised by BNPL consumers, such as unanticipated, expensive costs and fees, inadequate underwriting, trouble with refunds, returns, fraud, and disputes, and high levels of consumer data collection, CRL wrote. The regulations directly address these problems by requiring adherence to the New York rate cap, limiting fees, mandating underwriting, and providing transparency on underwriting, the group noted. The law also provides for dispute and fraud resolution disclosures and rights, prohibits multiple representments, simplifies returns/refunds, and requires disclosures.

CRL applauds refinements. The group highlighted the following three refinements that enhance consumer protections; they close loopholes, reduce unnecessary or hidden charges, and give consumers more control and privacy.

• Tips are no longer authorized. This was a worthwhile and important change, according to CRL. First, tips are not typically extracted by BNPL providers, whether it be Pay in Four or longer installment loans. Authorizing such charges, even with limits, suggests that tips are an acceptable practice, the group stated. On the contrary, tips in this context are not a gratuity, provide no real benefit to consumers, and are simply a means to extract fees from consumers.

• Data privacy is restricted. The final regulations have been revised so that product improvement is no longer expressly treated as a permitted use without separate consent, which will appropriately limit data usage, CRL noted.

• More consumer-directed payment. Consumers can allocate payments among specific BNPL loans and prepay principal and accrued interest, CRL observed. This is a meaningful shift away from a primarily lender-controlled allocation methodology, as the regulation called for default allocation rules when the consumer does not make an allocation.

Some trade groups object. While some trade groups said they generally support consumer-protection measures, including transparency, fee limitations, and dispute-resolution requirements, they contended that several provisions should be narrowed or clarified (see Banking and Finance Law Daily, Sept. 15, 2026).

In a Sept. 14 comment letter, the American Fintech Council (AFC) urged NYDFS to align the definition of a BNPL lender with the statute’s “primary purpose” standard rather than a broader “substantial purpose” test. According to AFC, a broader definition could bring within the rule’s scope software platforms, institutional investors, and secondary-market participants that do not directly extend credit to consumers.

A separate joint comment letter submitted by the Financial Technology Association (FTA), AFC, the American Financial Services Association, the Electronic Transactions Association, the National Association of Industrial Bankers, the New York Bankers Association, and TechNet similarly argued that the proposal’s definitions and limited exemptions could reach entities other than BNPL providers. The coalition said licensed lenders, out-of-state banks, technology vendors, secondary-market participants, and merchants offering BNPL at checkout could face regulatory obligations not intended by the statute.

AFC also objected to proposed underwriting standards that would assess a consumer's income and indebtedness for every transaction, labeling that requirement as creating an ability-to-repay standard that is not contained in the enacted law. The group urged NYDFS to preserve flexible, risk-based underwriting practices for BNPL products. AFC said member data suggests certain proposed requirements could reduce the availability of responsible credit in New York by more than $500 million annually.

The coalition also urged NYDFS to calibrate the rule to the risk profile of BNPL products, objected to enhanced disclosure requirements, requested an additional 45 days to review the changes, and asked the agency to conduct a cost-benefit analysis to determine the cumulative impact of the rules on market participants.

Companies: American Financial Services Association; American Fintech Council; Center for Responsible Lending; Electronic Transactions Association; Financial Technology Association; National Association of Industrial Bankers; New York Bankers Association; TechNet

RegulatoryActivity: BankingOperations ConsumerCredit FinancialStability Loans NewYorkNews StateBankingLaws