[Federal Register Volume 89, Number 106 (Friday, May 31, 2024)]
[Rules and Regulations]
[Pages 47068-47073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11800]


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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1026

[Docket No. CFPB-2024-0017]


Truth in Lending (Regulation Z); Use of Digital User Accounts To 
Access Buy Now, Pay Later Loans

AGENCY: Consumer Financial Protection Bureau.

ACTION: Interpretive rule; request for comment.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing 
this interpretive rule to address the applicability of subpart B of 
Regulation Z to lenders that issue digital user accounts used to access 
credit, including to those lenders that market loans as ``Buy Now, Pay 
Later'' (BNPL). This interpretive rule describes how these lenders meet 
the criteria for being ``card issuers'' for purposes of Regulation Z. 
Such lenders that extend credit are also ``creditors'' subject to 
subpart B of Regulation Z, including those provisions governing 
periodic statements and billing disputes. While not required under the 
Administrative Procedure Act, the CFPB is opting to collect comments on 
this interpretive rule and may make revisions as appropriate after 
reviewing feedback received.

DATES: This interpretive rule is applicable as of July 30, 2024. 
Comments must be received by August 1, 2024.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2024-
0017, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. CFPB-2024-0017 in the subject line of the message.
     Mail/Hand Delivery/Courier: Comment Intake--2024 BNPL

[[Page 47069]]

Interpretive Rule, c/o Legal Division Docket Manager, Consumer 
Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. 
Because paper mail in the Washington, DC area and at the CFPB is 
subject to delay, commenters are encouraged to submit comments 
electronically.
    Instructions: The CFPB encourages the early submission of comments. 
All submissions must include the document title and docket number. In 
general, all comments received will be posted without change to https://www.regulations.gov. All submissions, including attachments and other 
supporting materials, will become part of the public record and subject 
to public disclosure. Proprietary information or sensitive personal 
information, such as account numbers or Social Security numbers, or 
names of other individuals, should not be included. Submissions will 
not be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
(202) 435-7700 or https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Interpretive Rule

A. Executive Summary

    Over the past three years, the CFPB has extensively analyzed 
lenders marketing their loans as ``Buy Now, Pay Later.'' This includes 
a major study published in 2022, insights from supervisory 
examinations, and other market monitoring and investigation. Although 
market participants' loan offerings vary in this lending sector, the 
CFPB is publishing this interpretive rule to clarify existing 
obligations for market participants with specific business practices.
    This interpretive rule's legal analysis states that lenders that 
issue digital user accounts that consumers use from time to time to 
access credit products to purchase goods and services are ``card 
issuers'' under Regulation Z, including when those products are 
marketed as Buy Now, Pay Later (BNPL). Such lenders are ``card 
issuers'' because such digital user accounts are ``credit cards'' under 
Regulation Z. Traditional BNPL products are closed-end loans payable in 
four or fewer installments without a finance charge, used to make 
purchases on credit. Consequently, BNPL loans are subject to some, but 
not all, of Regulation Z's credit card regulations.
    Digital user accounts that consumers use to access BNPL credit 
mimic conventional credit cards. They meet the regulatory definition of 
``credit cards'' as defined at 12 CFR 1026.2(a)(15)(i). Lenders that 
issue such digital user accounts are ``card issuers'' as defined at 12 
CFR 1026.2(a)(7) and ``creditors'' for purposes of subpart B of 
Regulation Z, as defined at 12 CFR 1026.2(a)(17)(iii). However, 
traditional BNPL products do not meet the definition of ``open-end 
credit'' as defined at 12 CFR 1026.2(a)(20) or of a ``credit card 
account under an open-end (not home-secured) consumer credit plan'' as 
defined at 12 CFR 1026.2(a)(15)(ii).
    Accordingly, lenders that issue digital user account to access BNPL 
credit are subject to the regulations appearing in subpart B of 
Regulation Z, including, most importantly, provisions governing credit 
card dispute and refund rights. Although subpart B is labeled ``Open-
End Credit,'' 12 CFR 1026.2(a)(17)(iii) specifically states that 
subpart B also applies to credit that is not open end if, as with BNPL, 
the credit is not subject to a finance charge and is not payable by 
written agreement in more than four installments. This is the case 
because Congress expressly instructed the Bureau to apply open-end 
credit regulations to this form of credit that is not open end. The 
Truth in Lending Act (TILA) says that ``the Bureau shall, by 
regulation, apply [open-end credit] requirements to [card issuers that 
extend credit with no finance charge that is payable in four or fewer 
installments], to the extent appropriate, even though the requirements 
[of the open-end credit provisions] are by their terms applicable only 
to creditors offering open-end credit plans.'' \1\
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    \1\ 15 U.S.C. 1602(g).
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    Lenders that issue digital user accounts to access BNPL credit are 
generally not subject to the credit card regulations appearing in 
subpart G of Regulation Z (e.g., penalty fee limits and ability-to-
repay requirements).\2\
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    \2\ Subpart G generally applies only to ``credit card account[s] 
under an open-end (not home-secured) consumer credit plan.'' 
However, 12 CFR 1026.60 in subpart G may apply.
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B. Background

    Since the mid-2010s, a financing method marketed as ``Buy Now, Pay 
Later'' (BNPL) has rapidly gained popularity as an alternative to 
conventional credit cards in the United States and abroad.\3\ While 
variations of the product exist, for this interpretive rule, BNPL 
refers to a consumer loan for a retail transaction that is repaid in 
four (or fewer) interest-free installments and does not otherwise 
impose a finance charge.\4\ The loan generally requires an initial down 
payment of 25 percent, followed by three additional installments due 
every two weeks.
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    \3\ See CFPB, Buy Now, Pay Later: Market trends and consumer 
impacts, at 6 (Sept. 2022), https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf (Market Trends Report).
    \4\ Other variations of BNPL include loans that, for example, 
incur interest or other finance charges (often referred to as point-
of-sale loans). Depending on their features, such loans might be 
subject to other provisions of Regulation Z, including subparts C or 
G.
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    BNPL lenders currently acquire customers primarily through two 
channels: the merchant partner acquisition model and the app-driven 
acquisition model. In the merchant partner acquisition model, BNPL 
lenders typically establish contracts with online merchants to offer 
their BNPL product as a payment option on the merchant's website or 
mobile app checkout page.\5\ The BNPL lenders provide merchants with 
the necessary digital code to integrate or embed access to the BNPL 
product into the merchant websites or mobile apps. Such digital code or 
other integrations are referred to in this interpretive rule as 
``integrations.''
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    \5\ See Market Trends Report at 12-13.
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    In the app-driven acquisition model, which is less common but 
rapidly expanding, consumers use the BNPL lender's own website or 
mobile app directly to create a digital user account to access the BNPL 
product.\6\ Once activated by the provider, the consumer can use their 
digital user account through the BNPL website or mobile app to access 
credit and make purchases directly with partner merchants. For non-
partner merchants, the BNPL lender enables the payment part of the 
credit process by issuing a single-use virtual card to the consumer, 
normally through an issuer processor and a bank partner. The consumer 
then typically has 24 hours to complete their purchase directly with 
the merchant, using the virtual card.\7\
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    \6\ Id. at 14-15.
    \7\ See, e.g., Klarna, What is a One-time card and how does it 
work?, https://www.klarna.com/us/customer-service/what-is-a-one-time-card-and-how-does-it-work/ (last visited May. 14, 2024).
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    In addition, BNPL lenders may issue credit through other methods, 
such as in-store or through browser extensions.\8\ These methods 
generally operate the same as the acquisition methods described above, 
allowing the consumer

[[Page 47070]]

to access credit with their BNPL digital user account to make purchases 
either through the merchant's website or through the issuance of a 
single-use virtual card.
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    \8\ See, e.g., Affirm, Bring the power of Affirm to your 
Browser, https://www.affirm.com/shopping/browser-extension (last 
visited May 20, 2024).
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    Regardless of how consumers access BNPL, a BNPL digital user 
account is activated when a consumer first accesses BNPL credit, 
similar to how a virtual credit card number for a traditional credit 
card account is issued at the same time a consumer opens the credit 
card account online and makes their first purchase on the card. These 
digital user accounts are secure, personal profiles that the BNPL 
provider activates for a consumer, enabling the consumer to access and 
utilize BNPL credit.\9\ Once a digital user account is activated, the 
consumer can then immediately use their BNPL digital user account on an 
ongoing basis to access credit to make additional purchases. BNPL 
providers typically inform consumers of their ``amount available to 
spend,'' similar to a credit limit for conventional credit cards, and 
offer a frictionless borrowing process allowing consumers to rapidly 
access the BNPL credit.\10\
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    \9\ A digital user account is distinct from the concept of an 
account in TILA and Regulation Z.
    \10\ BNPL providers typically do not guarantee the ``amount 
available to spend'' and each loan is separately underwritten.
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    A significant and increasing number of Americans who purchase goods 
and services on credit do so with BNPL credit instead of conventional 
credit cards. According to a recent CFPB Making Ends Meet survey, 17 
percent of consumers with a credit record made at least one purchase 
using BNPL between February 2021 and February 2022.\11\ And data from 
five leading BNPL lenders reflect that originations have increased from 
$2 billion in 2019 to over $24 billion in 2021.\12\ BNPL borrowers also 
increased their repeat usage during this timeframe. The data reveal 
that the average number of BNPL loans taken out by BNPL consumers from 
a single lender each quarter rose from 1.9 to 2.8.\13\ The percentage 
of BNPL borrowers with more than five loans per quarter also increased, 
from 6.3 percent to 15.5 percent.\14\
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    \11\ See CFPB, Consumer Use of Buy Now, Pay Later: Insights from 
the CFPB Making Ends Meet Survey, at 5 (Mar. 2023), https://files.consumerfinance.gov/f/documents/cfpb_consumer-use-of-buy-now-pay-later_2023-03.pdf (MEM Survey Report); see also Bd. of Governors 
of the Fed. Rsrv. Sys., Economic Well-Being of Households in 2022, 
at 46 (May 2023) (reporting 12 percent of adults in U.S. households 
using BNPL in the prior 12 months, up from 10 percent in 2021).
    \12\ Market Trends Report at 31.
    \13\ Id.
    \14\ Id. at 33-34.
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    BNPL is popular among a broad range of consumers, but certain 
groups have shown a significantly higher likelihood of using BNPL. 
These groups include Black, Hispanic, and female consumers, as well as 
consumers with an annual household income between $20,001-$50,000 and 
consumers under the age of 35.\15\ In comparison to non-BNPL borrowers, 
BNPL borrowers tend to have higher levels of debt, carry balances on 
their conventional credit cards, have delinquencies on traditional 
credit products, and make use of higher-cost financial services like 
payday loans, pawn, and overdraft.\16\ BNPL borrowers are also more 
likely to use other credit products like conventional credit cards, 
personal loans, and student loans, but have less liquidity and savings 
compared to non-BNPL borrowers.\17\
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    \15\ MEM Survey Report at 22.
    \16\ Id.
    \17\ Id.
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    Consumers often use BNPL offerings as an alternative to 
conventional credit cards, and the two share many similarities. Both 
combine payment processing and credit services. Both charge transaction 
fees to merchants and are extensively used for retail transactions.\18\ 
And consumers often use these two payment methods in a similar manner. 
In fact, often when a consumer is making purchases online from a 
merchant's website, the only options for paying on credit consist of 
conventional credit cards and BNPL, which are presented next to each 
other as alternatives.
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    \18\ Id. at 6.
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    The CFPB has been closely monitoring the BNPL market by issuing 
reports based on collected BNPL data and supervising certain BNPL 
lenders. In December 2021, the CFPB issued mandatory data collection 
orders to five large BNPL lenders to understand market trends and 
practices. These responses formed the basis of the September 2022 
report ``Buy Now Pay Later: Market Trends and Consumer Impacts,'' which 
highlighted industry growth, as well as consumer benefits and risks 
associated with BNPL loans.\19\ The report noted, among other findings, 
a lack of standardized disclosures and challenges in resolving 
disputes.\20\ In March 2023, the CFPB published ``Consumer Use of Buy 
Now, Pay Later,'' which used data from the annual Making Ends Meet 
survey and credit bureaus to identify demographic and other 
characteristics of BNPL borrowers.\21\ In March 2024, the CFPB released 
its ``Consumer Response Annual Report'' for 2023, which noted issues 
consumers faced with merchants regarding BNPL, such as non-receipt of 
items and challenges in canceling loans.\22\ Through monitoring 
consumer complaints, the CFPB has further refined its understanding of 
the BNPL market. The CFPB continues to observe the industry and monitor 
new market and product trends.
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    \19\ See Market Trends Report.
    \20\ See id. at 72-73.
    \21\ See MEM Survey Report.
    \22\ See CFPB, Consumer Response Annual Report, at 64 (Mar. 
2024), https://files.consumerfinance.gov/f/documents/cfpb_cr-annual-report_2023-03.pdf.
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    Recognizing the importance of adequate consumer protections for 
BNPL loans, the CFPB is issuing this interpretive rule so that BNPL 
providers understand their obligations. As this interpretive rule 
explains, lenders that issue BNPL digital user accounts are ``card 
issuers'' under Regulation Z because the digital user accounts they 
issue constitute ``credit cards'' under Regulation Z. The term ``credit 
card''--which, as defined by TILA and Regulation Z, includes the term 
``other credit device'' or ``other single credit device'' used for the 
purpose of obtaining credit--encompasses digital user accounts that 
consumers can use through websites, mobile apps, browser extensions, or 
integrations with merchant websites or mobile apps to access BNPL 
credit for the purchase of goods and services. The CFPB also affirms 
through this interpretive rule that BNPL lenders that extend credit--
even though that credit is not subject to a finance charge and is not 
payable by written agreement in more than four installments--are 
creditors subject to subpart B of Regulation Z, including those 
provisions governing cost of credit disclosures and billing disputes.

C. Legal Analysis

    This interpretive rule discusses the application of subpart B of 
Regulation Z to lenders that issue digital user accounts that consumers 
use from time to time to access credit, which includes those lenders 
that market their loans as ``Buy Now, Pay Later.'' Regulation Z \23\ 
implements the Truth in Lending Act (TILA).\24\ The purpose of TILA is 
to ``assure a meaningful disclosure of credit terms so that the 
consumer will be able to compare more readily the various credit terms 
available to him and avoid the uninformed use of credit, and to protect 
the consumer against inaccurate and unfair credit billing and credit 
card practices.'' \25\ Accordingly, TILA and its implementing 
regulation

[[Page 47071]]

generally establish uniform methods for calculating the cost of credit, 
require meaningful disclosure of those costs to consumers, and provide 
standardized mechanisms for resolving credit billing disputes.\26\
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    \23\ 12 CFR 1026.
    \24\ 15 U.S.C. 1601 et seq.
    \25\ Id. at 1601(a).
    \26\ Regulation Z defines credit broadly as the right to defer 
payment of debt or to incur debt and defer its payment. BNPL credit 
meets this definition.
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    Although subpart B primarily covers open-end credit, many of its 
provisions apply more broadly, including to closed-end credit, under 
certain circumstances.\27\ Certain subpart B provisions, such as those 
governing cardholder liability, apply to any ``card issuer,'' 
regardless of the type of credit offered.\28\ Regulation Z defines 
``card issuer'' as ``a person that issues a credit card or that 
person's agent with respect to the card.'' \29\ Additionally, ``card 
issuers'' are considered ``creditors'' for purposes of subpart B if 
they also extend ``either open-end credit or credit that is not subject 
to a finance charge and is not payable by written agreement in more 
than four installments.'' \30\ Such ``creditors'' are broadly subject 
to the provisions of subpart B, including those governing disclosures 
and billing dispute resolution.\31\ Thus, BNPL lenders that issue a 
credit card as defined by Regulation Z are card issuers for purposes of 
the regulation. And as they also extend credit, even though that credit 
is not subject to a finance charge and not payable by written agreement 
in more than four installments, those BNPL lenders are creditors 
subject to the provisions of subpart B.
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    \27\ This can include BNPL credit, which for purposes of this 
interpretive rule is defined as a closed-end consumer loan for a 
retail transaction that is repaid in four (or fewer) interest-free 
installments and does not otherwise impose a finance charge. See 
also 12 CFR 1026.2(a)(17)(iii)-(iv). To the extent that subpart B 
applies to business-purpose credit cards, this would also include 
business-purpose BNPL credit. See 12 CFR 1026.12(a)-(b).
    \28\ See 12 CFR 1026.12, which covers unauthorized issuance and 
liability for unauthorized use. Other provisions of Regulation Z may 
also apply to ``card issuers'' regardless of the type of credit. See 
12 CFR 1026.60, in subpart G, which outlines the rules for credit 
and charge card applications and solicitations.
    \29\ 12 CFR 1026.2(a)(7). Where a BNPL provider partners with 
another party to extend credit, including a bank, depending on the 
facts and circumstances both entities may be ``card issuers.''
    \30\ See 12 CFR 1026.2(a)(17)(iii) (one of several independent 
tests by which an entity can qualify as a ``creditor'' under 12 CFR 
1026.2(a)(17)). Of course, were a BNPL provider to charge a finance 
charge, or allow repayment in more than four installments, they 
would meet one or more of the other independent tests for qualifying 
as a ``creditor.''
    \31\ Subpart B includes 12 CFR 1026.6 through .9, which cover 
disclosures, and 12 CFR 1026.13, which covers billing error 
resolution.
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    The definition of ``credit card'' in TILA and Regulation Z is not 
limited to a plastic or metal embossed physical card. While the term 
certainly includes those, it also includes archaic forms of credit 
devices like plates and coupon books, and non-physical credit devices 
like account numbers, including virtual credit cards where the account 
number itself is the ``credit card.'' In creating these definitions, 
Congress understood the need for flexibility to cover evolving types of 
credit devices, reflecting the rapid advancement of credit mechanisms 
at the time of enactment. TILA defines ``credit card'' as ``any card, 
plate, coupon book or other credit device existing for the purpose of 
obtaining money, property, labor, or services on credit.'' \32\ 
Regulation Z similarly defines ``credit card'' as ``any card, plate, or 
other single credit device that may be used from time to time to obtain 
credit.'' \33\
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    \32\ 15 U.S.C. 1602(l).
    \33\ 12 CFR 1026.2(a)(15)(i). The term is also defined to 
include ``a hybrid prepaid-credit card as defined in Sec.  
1026.61.''
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    The CFPB interprets the terms ``other credit device'' and ``other 
single credit device'' found within the TILA and Regulation Z 
definitions of credit card to include a BNPL digital user account that 
a consumer can use through websites, mobile apps, browser extensions, 
or integrations with merchant websites or mobile apps to access BNPL 
credit, to the extent the user account is used to draw, transfer, or 
authorize the draw or transfer of credit in the course of authorizing, 
settling, or otherwise completing transactions to obtain goods or 
services.\34\ The broad catch-all terms ``other credit device'' and 
``other single credit device'' are not defined by TILA and Regulation 
Z.\35\ However, this interpretation is consistent with the ordinary 
meaning and historical context of the words.
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    \34\ A BNPL integration includes, for example, a BNPL lender's 
code or process embedded in the checkout flow of a merchant website 
or mobile app that allows a consumer to access a digital user 
account to obtain BNPL credit.
    \35\ In addition, there is no well-understood definition of 
``other credit device'' or ``other single credit device'' under 
State law.
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    The CFPB's interpretation flows from the ordinary meaning of the 
word ``device.'' Merriam-Webster Dictionary contains several 
definitions for the word ``device,'' including ``something devised or 
contrived: such as . . . [a] plan, procedure, [or] technique . . . [or] 
a piece of equipment or a mechanism designed to serve a special purpose 
or perform a special function.'' \36\ Similarly, Oxford English 
Dictionary defines ``device'' in part to mean ``[t]he result of 
contriving; something devised or framed by art or inventive power; an 
invention, contrivance; esp. a mechanical contrivance (usually of a 
simple character) for some particular purpose.'' \37\ These definitions 
indicate that the ordinary meaning of ``device'' is broad and 
incorporates a wide range of mechanisms, tools, or procedures 
specifically designed or contrived to achieve a particular purpose.
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    \36\ Device, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/device (last visited May 20, 2024). See also, 
e.g., James v. State, 113 P. 226, 228 (Okla. Crim. App. 1910) (``Mr. 
Webster defines a `device' as follows: `That which is devised, or 
formed by conception, a contrivance, and invention, a project, a 
scheme, often a scheme to deceive, a stratagem, an artifice.' '').
    \37\ Device, Oxford English Dictionary, https://doi.org/10.1093/OED/1300217116 (last visited May 20, 2024).
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    The CFPB's interpretation is also consistent with use of the word 
``device'' broadly in other contexts. For example, both the CFPB, and 
the Federal Reserve Board (Board) before it, have interpreted ``access 
device'' in Regulation E to include such non-physical devices as 
personal identification numbers (PINs), telephone transfer and bill 
payment codes, and other means that may be used by a consumer to 
initiate an electronic fund transfer.\38\
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    \38\ See sec. 1005.2(a)(1); see also Regulation E, comment 
2(a)(1)-1.
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    The CFPB's interpretation is also consistent with Congress' intent 
to define the terms ``other credit device'' and ``credit card'' 
broadly. As a preliminary matter, courts have routinely held that, as a 
remedial statute, TILA should be interpreted expansively in favor of 
the consumer.\39\ More specifically, as courts have recognized, the 
inclusion of the phrase ``other credit device'' in the statutory 
definition of ``credit card'' indicates that Congress intended the term 
``credit card'' to encompass a wider scope than its customary 
usage.\40\ Congress initially enacted the definitions in 1970 at the 
height of a rapid evolution of credit devices, which first included 
now-archaic credit devices such as coins and plates before the use of 
conventional

[[Page 47072]]

credit cards became widespread.\41\ In this context, Congress appears 
to have intended a flexible and comprehensive definition of ``credit 
card'' that could encompass both the entire range of existing credit 
devices and also those ``other credit devices'' that might not yet 
exist.
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    \39\ Begala v. PNC Bank, Ohio, Nat. Ass'n, 163 F.3d 948, 950 
(6th Cir. 1998), as amended (Mar. 26, 1999); Rossman v. Fleet Bank 
(R.I.) Nat. Ass'n, 280 F.3d 384, 390 (3d Cir. 2002).
    \40\ See, e.g., United States v. Bice-Bey, 701 F.2d 1086, 1092 
(4th Cir. 1983) (holding that credit card numbers, not just the 
credit cards themselves, can be a ``credit device'' for purposes of 
TILA); Telco Commc'ns Grp., Inc. v. Race Rock of Orlando, L.L.C., 57 
F. Supp. 2d 340, 343 (E.D. Va. 1999) (holding that telephone calling 
cards can be credit cards); Munoz v. Seventh Ave., Inc., No. 04 C 
2219, 2004 WL 1593906, at *4 (N.D. Ill. July 15, 2004) (``Section 
1602(k) contains a broad definition of `credit card' which 
encompasses items that are not within the common understanding of 
the term credit card, such as a `coupon book' or `other credit 
device.' '').
    \41\ See John R. Webster & William F. Davis III., Bank Credit 
Plans: Innovations in Consumer Financing, 1 Loy. L. A. L. Rev. 49 
(1968); see also 113 Cong. Rec. 28765 (1967) (member of 
Congressional Committee on Banking and Currency referring to credit 
cards as ``the new credit device'').
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    Indeed, the Board, which previously had jurisdiction over 
Regulation Z, adopted a similarly broad interpretation of ``other 
single credit device'' in 2010. The Board clarified in Official Staff 
Interpretations of Regulation Z that non-physical devices--in that 
case, account numbers--could be considered ``credit cards'' under the 
definition.\42\ The Board explained in the rulemaking preamble that 
while Congress did not generally intend to treat all account numbers as 
credit cards--for example, where credit is transferred into a 
consumer's asset account--it would be inconsistent with Congressional 
intent not to do so when the account number could be used to access 
credit for the purchase of goods and services.\43\ As an example, the 
Board provided a hypothetical scenario in which an open-end credit 
account was designed for online purchases, functioning like a 
conventional credit card account, but only accessible with an account 
number.\44\ In such circumstances, the Board stated, it believed that 
TILA's credit card protections should apply.\45\
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    \42\ See Regulation Z, comment 2(a)(15)-2.ii.C. An ``account 
number'' contemplated by the Board's interpretation is distinct from 
a BNPL digital user account.
    \43\ See 76 FR 22948 (Apr. 25, 2011). In that rulemaking, the 
Board was only considering open-end credit, but the CFPB believes 
that the logic applies similarly to closed-end credit.
    \44\ Id.
    \45\ Id.
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    This analysis applies equally in the BNPL context. BNPL is a 
product primarily designed for the online purchase of goods and 
services and a digital BNPL user account functions like a conventional 
credit card. Consumers can use their BNPL digital user accounts through 
BNPL websites, mobile apps, browser extensions, or integrations with 
merchant websites or mobile apps to access credit for purchases. Given 
its similarities to conventional credit cards, a consumer's BNPL 
digital user account is among the types of ``credit devices'' that 
Congress would have had in mind in enacting TILA.
    In order for a device to constitute a credit card under Regulation 
Z, it must be usable from time to time to obtain credit.\46\ The 
commentary to Regulation Z interprets the term ``time to time'' to 
``involve[ ] the possibility of repeated use of a single device.'' \47\ 
The CFPB interprets the phrase ``usable from time to time'' to cover a 
consumer's BNPL digital user account that is issued as part of a 
business model designed for repeat use that can be used through 
websites, mobile apps, browser extensions, or integrations with 
merchant websites or mobile apps, to access credit for the purchase of 
goods and services.\48\ Like conventional credit cards, the BNPL 
business model is designed around the repeat use of a digital user 
account to make real-time purchases on credit.\49\ The CFPB therefore 
interprets the term ``credit cards'' to include such digital credit 
devices for purposes of TILA and Regulation Z.
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    \46\ See sec. 1026.2(a)(15)(i).
    \47\ See Regulation Z, comment 2(a)(15)-1.
    \48\ The existence of a limit on the number of BNPL loans a 
consumer can have at one time or the issuance of a single-use 
virtual card as part of the credit extension and payment process 
would not preclude the credit device from satisfying the ``time to 
time'' requirement.
    \49\ This is the case regardless of whether the customer is 
acquired through the merchant partner acquisition model or the app-
driven acquisition model, and regardless of whether the consumer 
uses the credit device more than one time.
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    Of course, not all digital user accounts are credit cards. However, 
digital user accounts with the purpose of giving consumers access to 
credit from time to time in the course of completing transactions to 
purchase goods or services, including those marketed as BNPL, meet the 
regulatory definition of ``credit card.'' When consumers use them 
through websites, mobile apps, browser extensions, and integrations, 
they get credit in the course of completing transactions to pay for a 
product at check-out or even in physical stores.\50\ And these digital 
user accounts ``exist for [that] purpose.'' \51\ They are, effectively, 
digital replacements for conventional credit cards, and consumers use 
them in the same way as conventional credit cards. The statutory and 
regulatory definitions of ``credit card'' are broad enough to capture 
new, technologically advanced ``devices'' designed to mimic the core 
features of conventional credit cards.
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    \50\ The fact that sometimes BNPL loans are declined does not 
change this fact. The same can be said about conventional credit 
cards.
    \51\ 15 U.S.C. 1602(l).
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    Consequently, BNPL providers issuing the credit cards (and their 
agents with respect to the credit card) are ``card issuers'' for 
purposes of Regulation Z. Additionally, as noted above, a ``card 
issuer'' is a ``creditor'' for purposes of subpart B if it extends 
credit, even though that credit is not subject to a finance charge and 
not payable by written agreement in more than four installments. Thus, 
BNPL lenders that issue credit cards are ``creditors'' for purposes of 
subpart B and must comply with its requirements, including the 
provisions related to disclosures and billing dispute resolution.

II. Regulatory Matters

    This is an interpretive rule issued under the Bureau's authority to 
interpret TILA and Regulation Z, including under section 1022(b)(1) of 
the Consumer Financial Protection Act of 2010, which authorizes 
guidance as may be necessary or appropriate to enable the CFPB to 
administer and carry out the purposes and objectives of Federal 
consumer financial laws.\52\ While not required under the APA, the CFPB 
is collecting comments and may make revisions to the interpretive rule 
at a later time as appropriate in light of feedback received. The CFPB 
may take no further action if no revisions are warranted.
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    \52\ 12 U.S.C. 5512(b)(1).
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    By operation of TILA section 130(f), no provision of TILA sections 
130, 108(b), 108(c), 108(e), or section 112 imposing any liability 
applies to any act done or omitted in good faith in conformity with 
this interpretive rule, notwithstanding that after such act or omission 
has occurred, the interpretive rule is amended, rescinded, or 
determined by judicial or other authority to be invalid for any 
reason.\53\
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    \53\ 15 U.S.C. 1640(f).
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    The CFPB has determined that this interpretive rule does not impose 
any new or revise any existing recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would be 
collections of information requiring approval by the Office of 
Management and Budget under the Paperwork Reduction Act.\54\
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    \54\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\55\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the rule's published effective date. The Office of Information and 
Regulatory Affairs has designated this interpretive

[[Page 47073]]

rule as a ``major rule'' as defined by 5 U.S.C. 804(2).
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    \55\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-11800 Filed 5-30-24; 8:45 am]
BILLING CODE 4810-AM-P