Apple Pay Later withdrawal likely because of a law passed in 1968
What is the Truth in Lending Act (TiLA) and when was it originally passed?
The Truth in Lending Act (TiLA) is a federal law enacted in 1968 to protect consumers in their dealings with lenders and creditors2. It requires lenders to disclose information relating to loan costs, enabling consumers to shop around for loans and creating a fair and competitive financial marketplace. TiLA establishes regulations for various types of lending, including credit cards and mortgages, and grants consumers the right to cancel certain credit transactions involving a lien on their principal dwelling.
What recent actions has the US Consumer Financial Protection Bureau (CFPB) taken regarding BNPL loans?
The US Consumer Financial Protection Bureau (CFPB) has recently taken actions to bring Buy Now, Pay Later (BNPL) loans under the scope of the Truth in Lending Act (TiLA). In December 2021, the CFPB launched an investigation into BNPL loans and proposed that they fall within the scope of TiLA. This interpretive rule states that BNPL lenders meet the criteria for being "card issuers" for TiLA purposes. As a result, BNPL lenders must adhere to consumer protection regulations, including providing refunds, investigating customer disputes, pausing payments, and issuing credits when necessary.
How did the Truth in Lending Act not apply to BNPL services like Apple Pay Later initially?
The Truth in Lending Act (TILA) initially did not apply to Buy Now, Pay Later (BNPL) services like Apple Pay Later because BNPL loans were not considered as credit cards. BNPL loans are typically repaid in four or fewer interest-free installments and do not impose a finance charge, which made them exempt from TILA regulations that apply to credit card transactions. However, the Consumer Financial Protection Bureau (CFPB) later issued an interpretive rule that categorized BNPL digital user accounts as "credit cards" and brought them within the scope of TILA, requiring BNPL providers to adhere to specific disclosure requirements, consumer liability limitations, transaction dispute procedures, and refund rights similar to those governing credit card transactions123.