The New York legislature has introduced no fewer than three separate bills in 2025 to license and regulate the business activities of providers of buy-now-pay-later (“BNPL”) products. The first quarter of the year has seen the introduction of Senate Bill 4606, Assembly Bill 6757, and lengthy budget bill Assembly Bill 3008, each of which would enact a similar, but not identical, “Buy-Now-Pay-Later Act.” If enacted into law, each of the three bills would require certain providers of BNPL credit to obtain a license from the New York Department of Financial Services (“NYDFS”).

BNPL products have experienced increasing popularity in recent years as an alternative to credit cards for small-dollar retail transactions. While there are differences between available BNPL programs, the most common BNPL model is an extension of credit repayable in four or fewer installments that does not carry any interest, origination fee, or other finance charges—although such products frequently charge other incidental charges such as late fees or insufficient funds charges. Providers historically have argued that products structured in this manner generally do not trigger cost-of-credit disclosure (and limited substantive) requirements under the federal Truth in Lending Act (“TILA”). That view was challenged recently with the May 2024 publication of a Consumer Financial Protection Bureau (“CFPB”) interpretive rule asserting that traditional four-installment BNPL loans with no finance charge may be subject to certain TILA requirements pertaining to credit cards if they are offered through a “digital user account” access model, but the CFPB has since indicated that it likely will rescind such guidance. Research conducted by the CFPB indicated that BNPL products are more likely to be used by consumers with higher levels of debt, lower incomes, and less liquidity than some competing products, which has been part of the impetus for regulatory action under a consumer protection rationale. Particularly in light of the CFPB’s rollback of its BNPL Interpretive Rule, states, like New York, may see a greater need to take a more active role in regulating the product.

Each of the three New York bills defines a “BNPL loan” somewhat differently, such that the scope of the resulting regulation and licensing obligation will depend on which, if any, of the bills is enacted into law. For example, the bills vary among themselves with respect to whether a BNPL loan is defined to include or exclude a transaction that charges interest, whether the transaction is limited to closed-end contracts, and whether the transaction is repayable in a fixed number of installments. Each of the bills excludes a credit sale, whereby a retailer or seller provides a consumer with financing to purchase that retailer’s goods or services, such that the legislation would only apply to third-party extensions of credit.

In addition to licensing, each bill would subject BNPL providers to restrictions on changes in control; regular examinations; recordkeeping requirements; annual reporting requirements; prohibitions on confessions of judgment and unfair, deceptive or abusive acts or practices; consumer dispute resolution requirements; and restrictions on the use of consumer data, among others. Each bill also would require providers to disclose the cost of credit and other material terms of a BNPL loan, and require providers to make a reasonable determination of the consumer’s ability to repay the BNPL loan. Credit reporting requirements vary among the bills, as do provisions regarding permissible charges. Specifically, the bills are inconsistent as to whether a provider is prohibited from charging any interest, penalty, late fee, or other consideration at all, is permitted to charge fees only according to limits to be established by the NYDFS, or is prohibited only from collecting any fees or charges exceeding New York’s civil usury limit.

The legislation would exempt certain national and state-chartered banks and thrifts. One of the bills would also exempt entities that hold a license under New York’s Licensed Lenders Law, which licenses providers of certain smaller-dollar consumer and commercial loans—generally consumer loans of $25,000 or less or commercial loans of $50,000 or less, in each case having annual percentage rates (“APRs” ) in excess of the state’s civil usury limits (16% in many cases).

Each bill provides that a BNPL loan made by an unlicensed person who is not exempt would be void and uncollectable. In addition, a person convicted for violating the act would be guilty of a misdemeanor and subject to the potentially significant money penalties provided under existing New York law. The legislation authorizes the NYDFS to promulgate rules to implement the Buy-Now-Pay-Later Act if it is enacted. The effective date of the act, if enacted, is contingent on the particular bill, and ranges from immediate effect to an effective date at least a year after enactment.  Similar New York legislation to license BNPL providers was proposed in 2024 but failed to be enacted. It is possible that legislators viewed state action in the space as less urgent at that time given attention being paid to BNPL products at the federal level. With the change in administrations and likely rescission of the CFPB’s BNPL Interpretive Rule, however—and amid perceptions among some state regulators of an incipient federal regulatory vacuum—the enactment of the legislation may be more likely this time around.