Unpacked: What federal rule rollbacks could mean for the future of BNPL
Changes at the Consumer Financial Protection Bureau may lead to new innovations and fewer regulations for the fintech companies that run payment services like buy-now, pay-later.
From the start, the top of the agency has seen a major leadership shift under President Donald Trump. In February, Russel Vought was named acting director of the CFPB, replacing Rohit Chopra who had advocated for more regulations on the fintech space and oversaw the publication of reports around how they can be financially precarious for consumers. As expected, the Trump administration spent its first few months undoing several Biden-era CFPB rules, including one controversial rule that sought to put more requirements on BNPL around what kind of consumer disclosure protections they provide.
Jonathan Pompan, a partner at law firm Venable, who chairs the Consumer Financial Services Practice Group and CFPB Task Force, said while the foundation of consumer protection laws hasn’t changed, the attitudes and focus at the agency have indeed shifted.
“At the federal level, there’s been a significant deregulatory push at the Consumer Financial Protection Bureau, including attempts at downsizing and signaling to the marketplace a narrower set of priorities compared to what had previously been a broad, expansive agenda,” he said.
Still, any shifts in focus could be critical for brands and retailers, given how payment methods and flexibility are increasingly meaningful parts of the customer journey. There’s increasing demand for newer digital-forward services; about half of shoppers said they have used BNPL services like Affirm or Klarna, per a Lending Tree survey of 2,000 shoppers in April 2025. And as far as payment methods, digital wallets continue to grow their share. About 17% of shoppers used mobile or digital wallets for their last in-store transaction, according to a new Pymnts Intelligence report, up more than 4% in three years.
Yet the convenience of such tools is proving to be a potential source of debt for American shoppers, especially those crunched by high costs of living or dealing with lower credit scores. Klarna, which put its IPO plans back on the shelf amid market disruptions caused by tariff policy changes, reported higher defaults last month with about $136 million in consumer credit losses. The share of unpaid loans went from 0.51% in the first quarter of 2024 to 0.54% this year. More broadly, a Bankrate survey released last month found that about half of BNPL users have had an issue like missing a payment or overspending.
Here’s a rundown of how CFPB changes are affecting payment companies and what brands should know about them.
Regulation Z rollback
Back in May 2024, Chopra’s CFPB issued an interpretive rule announcing that “Regulation Z” truth-in-lending rules would apply to BNPL companies. These rules, which already apply to credit cards, would require BNPL lenders to investigate disputes, refund returned products for cancelled service and provide billing statements in the same way credit card companies do.
But this move generated opposition and legal action from the Financial Technology Association, which represents multiple fintech players like Block, Klarna and PayPal. They protested the rule because of both the way it was issued and claimed it showed an “underlying misunderstanding of BNPL,” per FTA president and CEO Penny Lee. For instance, providing billing statements the same way credit card companies do may not make sense given how installment plans can be set up over a few weeks — a statement issued 21 days in advance of the payment due could actually overlap with the due dates for payments and cause confusion, the FTA pointed out during a public comment period.
In May 2025 under the Trump administration, the CFPB announced it would not enforce that interpretive rule. It signaled that it would shift its enforcement away from regulating BNPL companies and that it would consider rescinding the BNPL rule altogether.
“The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans,” the CFPB’s statement said.
The role of consumer disclosure
Teresa Murray, consumer watchdog director for the Public Interest Research Group, supported the application of Regulation Z to BNPL lenders. She said rolling this back means fewer protections at a time when BNPL is becoming more popular — not just for niche online purchases, but even for everyday items like groceries.
“The CFPB’s position was not to outlaw BNPL. And it wasn’t our position to break these off the marketplace,” Murray said. “It’s just that there needs to be more transparency and consumer protection.”
Affirm, which is not represented by the FTA, declined an interview request on the Regulation Z topic. However, CEO Max Levchin on the company’s latest earnings underscored the importance BNPL companies reporting information about their lending activity to credit bureaus.
“Whatever regulatory regime we are in or heading to, the right thing to do is to help people not stack loans, which is the number one concern regulators of all types always have,” he said, according to a transcript. “If you’re borrowing here and you’re borrowing there, it is at least important to know the total size of your overall debt. We’ll lead the way. We’ll always do the right thing first, but I think it’s really important the industry embraces this practice.”
Section 1033 uncertainty
Another wrinkle in the law affecting fintech firms is the Section 1033 “open baking rule.” This rule, finalized October 2024 but rooted in the Dodd-Frank Act of 2010, opens the door for more sharing of consumer financial data between parties with consumer authorization. It also spells out how data providers should operate and what they have to share.
But some banks and their supporters have looked to roll the law back, saying that the CFPB didn’t have authority to allow this kind of data sharing between parties. A lawsuit by the Bank Policy Institute and the Kentucky Bankers Association in Kentucky Federal Court looks to undo the law. The CFBP itself has also reversed course and said that it will rescind the rule.
But the fintech firms at the FTA have intervened in the lawsuit in hopes to keep the rule in play, calling it a vital way to increase competition and innovation.
“Vacating it is a handout to the biggest banks, who are trying to limit competition and debank Americans from the digital financial services they want to use,” said the FTA’s president and CEO, Penny Lee, in a statement on May 8. “It is a missed opportunity to further financial innovation. Americans must have a right to control their financial lives, not Wall Street.”
As of early June, the court had not yet ruled on the plaintiffs’ bid to vacate the rule.
Oversight changes
Beyond the Regulation Z rollback, the FTA notched a victory when President Trump signed a resolution that overturned the CFPB’s “larger participant rule” that would increase oversight of Big Tech payment companies. This rule was put into place in the final stretch of the Biden Administration, and it meant nonbank companies doing at least 50 million consumer payment transactions a year would be subject to CFPB authority. It would apply to services like digital wallets, payment apps, peer-to-peer payment apps and P2P apps, and took effect January 2025.
But the FTA lobbied for the rule to be overturned, citing overreach and over-regulation. By early May, a resolution to undo the rule was approved by both chambers of Congress and sent to Trump’s desk. “This action stops a harmful rule that would have raised costs, limited choice and stifled innovation in digital payments,” the FTA’s statement on the signing said.
But some consumer interest groups blasted the move as a giveaway to Big Tech. Adam Rust, the director of financial services for the watchdog group Consumer Federation of America, said in a news release that nonbank payment companies will operate “in a regulatory blind spot where their actions go unsupervised and consumers are left with no recourse except to complain to a chatbot.”
What’s next
Still, a lack of new CFPB oversight is hardly grounds for a free-for-all, Venable’s Pompan said. Consumer protection laws are still on the books, and a number of states are also looking to get into BNPL regulation on their own. New York’s Gov. Kathy Hochul in late May signed a law that imposes new licensing requirements on BNPL providers. And California, for instance, also requires BNPL providers to obtain a lending license and comply with consumer credit laws.
“Enforcement risk continues, from state regulators and private plaintiffs, and the laws are still on the books” he said. “From a risk perspective, you can’t really let your guard down.”
But regulatory rollbacks could mean more room for well-heeled companies to invest in changes to their operations or take on a greater share of the market by becoming a bank. Levchin from Affirm said during the company’s recent earnings call that while there are barriers and drawbacks to becoming a bank — like having to gather and hold deposits — the company would consider pursuing one if there was a product that required it.
Pompan from Venable also said that the new regulatory environment could lead to more products or company changes, which in turn could change the experience when people check out on a brand’s or retailer’s website using a BNPL service. Less pressure to comply with Regulation Z could mean that some firms are less standardized in how they handle customer issues like billing, dispute resolution or refunds. And if fintech firms themselves become banks, it could change how their products are handled at checkout or how loans are issued.
“By stepping back, the CFPB is offering some operational relief, and that may create a landscape for greater innovation,” Pompan said.