Marketplace Lending

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Litigation involving Colorado’s opt-out from the interest exportation provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) has taken an adverse turn for the financial services industry. On November 10, the United States Court of Appeals for the Tenth Circuit issued a ruling reversing a preliminary injunction imposed by the United States District Court for the District of Colorado in June 2024 that prevented enforcement of Colorado’s usury restrictions against parties to the litigation, including any members of various industry association parties—the National Association of Industrial Bankers, American Financial Services Association and American Fintech Council—with respect to loans in which the lender was not located, for interest exportation purposes, in Colorado. Subject to further proceedings, the Tenth Circuit’s ruling re-opens the door for loans originated by state-chartered banks and similar financial institutions to be subject to Colorado usury restrictions when either: (i) the borrower is located in the state; or (ii) subject to certain exceptions, the lender is located in the state, regardless of the location of the borrower. The ruling will become effective, if at all, only after issuance of the Tenth Circuit mandate, which may be stayed pending further appellate proceedings as discussed below.

As addressed in our prior discussion of the Colorado DIDMCA opt-out and related litigation, DIDMCA provides the basis, under federal banking law, for state-chartered, FDIC-insured banks and certain similar financial institutions to “export” the interest-related requirements of their home or, in certain cases, branch office (host) states when lending elsewhere. Both national banks and state-chartered banks have such authority, but DIDMCA conditions state-chartered banks’ authority on the ability of individual states to opt out of the interest exportation regime under 12 U.S.C. § 1831d. Iowa and Puerto Rico have had longstanding opt-outs; certain other states initially opted out but later repealed such opt-outs; and Colorado enacted an opt-out that would have become effective July 1, 2024 but for litigation by industry participants that resulted in the June 2024 preliminary injunction. Continue Reading DIDMCA Opt-Out Update — Tenth Circuit Reverses Colorado Preliminary Injunction

Around Christmas 2024, the Ohio Division of Financial Institutions (“DFI”) left a lump of coal in marketplace consumer lenders’ proverbial stockings by issuing guidance that asserted a license under the Ohio Small Loan Act (“SLA”) was required to arrange consumer loans of $5,000 or less in exchange for compensation—even if those loans were issued by federally insured banks pursuant to their authority under federal banking law. Expanded guidance and FAQs issued in January 2025 further supported DFI’s position that a license would be required for many parties engaged in arranging or brokering Ohio loans. Combined, the issuances left some market participants—particularly those operating under bank partnership models—scrambling to determine whether their programs were subject to the SLA under the DFI’s new position, whether to apply for a license, and whether obtaining a license would then impose material substantive limitations on affected lending programs.

In a positive development for consumer lending platforms (among other industry participants), the DFI appears to have withdrawn the 2024 guidance, albeit subject to the regulator’s ongoing consideration of underlying issues.

As of October 31, 2025, the DFI has updated its guidance on the application of the SLA to bank partnerships, reversing course from its earlier interpretation of the statute. The updated guidance states that the DFI will not require any non-bank entity that is compensated for arranging bank loans in any amount to obtain a license under the SLA or to otherwise engage in such activity.  Critically, the guidance also provides that the DFI does not intend to pursue enforcement action against any entity for engaging in such activity in calendar year 2025 without a valid license (whether or not such entity pursued a license application following the December 2024 and January 2025 guidance issuances).Continue Reading Ohio Walks Back Prior Small Loan Act Guidance, Eases Licensing Position for Bank Partnerships

On June 24, 2025, the Department of Housing and Urban Development (“HUD”) published a Request for Information (“RFI”) to better understand how increasing consumer use of Buy Now Pay Later (“BNPL”) products impacts housing affordability and stability in connection with the residential loan programs insured by the Federal Housing Administration (“FHA”). BNPL products, which allow consumers to purchase goods and services and repay over time (typically, though not always, through four or fewer deferred installments payable over six to eight weeks with no periodic interest or other finance charges), have continued to gain popularity over the past decade. To date, however, HUD has not incorporated consideration of BNPL products into underwriting guidelines for FHA-insured mortgage loans. With the RFI, HUD is seeking more information on whether it should develop policies to address potential ability-to-repay risks from these relatively new products.

Background on BNPL

While retail financing has a long history in the U.S., the concept of BNPL as a distinct class of product largely stems from the introduction of a “pay-in-4” product into the U.S. around 2018. This core element of the BNPL market involves the origination of unsecured, interest-free short-term installment loans to pay for relatively small-dollar retail purchases. Payments are usually due in four or fewer equal installments, with the first payment often due as a down payment at the time of sale. Subsequent payments are typically due every two weeks. Consumers enter into BNPL loans frequently through apps or purchase-and-origination flows managed by fintech BNPL providers. BNPL lenders may approve or deny a loan based on their own individual underwriting criteria, which may include reliance on a consumer report (often pulled as a soft pull to prequalify a consumer for a potential range of terms) and/or the consumer’s repayment history with the BNPL lender. BNPL lenders generally do not report repayment history or default to the consumer reporting agencies, although: (i) some lenders offer consumers the option to report positive repayment histories, and (ii) credit bureaus are planning to incorporate BNPL payments into credit scores and craft new categories to better match typical BNPL structures (as compared to reporting formats currently relevant for installment loans with monthly payments or traditional credit cards), each of which may increase adoption of BNPL credit reporting over time.Continue Reading HUD Requests Information on Buy Now Pay Later

Consistent with expectations for lighter regulation under the Trump administration, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) indicated in a March 26, 2025 court filing that it intends to revoke an Interpretative Rule it issued in May 2024 that would regulate certain Buy Now, Pay Later (“BNPL”) products as credit cards for the purposes of the federal Truth in Lending Act (“TILA”).

As discussed in an earlier Mayer Brown blog post, the Bureau previously issued an Interpretative Rule clarifying that lenders who issue “digital user accounts” that allow consumers to access credit for retail purchases are considered “card issuers” who must comply with additional disclosure and substantive requirements under TILA and its implementing regulation, Regulation Z. Prior to the issuance of the CFPB’s Interpretive Rule, providers of what has become the “core” BNPL product in the US—a closed-end loan that does not bear a finance charge and is repayable in not more than four installments—generally took the position that their activities did not trigger Regulation Z compliance obligations. The Interpretive Rule, however, explained that certain Regulation Z requirements nevertheless apply where a credit card is involved, and characterized “digital user accounts” as credit cards.  The Interpretive Rule followed over three years of market research on the BNPL industry during which the CFPB determined that consumers often used BNPL as a substitute for conventional credit cards, and represented an attempt to close what it characterized as a regulatory loophole, notwithstanding various ways in which typical BNPL accounts differ materially from credit cards in the way in which consumers access credit.Continue Reading CFPB Indicates That It Will Rescind Buy Now, Pay Later Interpretative Rule

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.Continue Reading New York Proposes to License Buy-Now-Pay-Later Lenders

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

On October 22, 2024, the Consumer Financial Protection Bureau (CFPB) marked a significant milestone in the shift towards open banking in the United States with the finalization of its rulemaking on Personal Financial Data Rights. As we discussed in our Legal Update on the October 2023 proposed rule, the final rule provides the long-awaited implementation of Section 1033 of the Dodd-Frank Act, enacted in 2010, and establishes a comprehensive regulatory framework to provide consumers—and their authorized third parties—with rights to receive structured, consistent and timely access to consumers’ personal financial data held by financial institutions and other financial services providers.

The 594-page final rule is intended to allow consumers to access and share data held by banks, credit unions, credit card issuers, digital wallets, payment apps and other financial service providers, with the goal of improving customer choice and increasing competition, while strengthening consumer protections by imposing limitations on authorized third parties’ collection, use and retention of consumers’ data. Financial institutions subject to the final rule could face a variety of compliance, operational and technical challenges as they build out the infrastructure necessary to comply with the final rule. For the largest financial institutions, which include depository institutions with total assets in excess of $250 billion and non-depository institutions that generated at least $10 billion in total receipts in either calendar year 2023 or calendar year 2024, compliance is required by April 1, 2026, with compliance by smaller covered institutions required in phases beginning April 1, 2027, through April 1, 2030.Continue Reading CFPB Issues Long-Awaited Open Banking Rule; Lawsuit Immediately Filed

On June 18, state-chartered banks and their fintech partners received welcome news in ongoing litigation challenging the scope of Colorado’s opt-out from the interest exportation regime established by the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). The US District Court for the District of Colorado issued a preliminary injunction prohibiting state officials from enforcing state-specific interest limitations against any member of the plaintiff associations—the National Association of Industrial Bankers, American Financial Services Association and American Fintech Council—with respect to any loan not “made” in Colorado, where “made” means that the lender is located and conducts certain key loan-making functions.Continue Reading DIDMCA Opt-Out Update—District Court Constrains Colorado Opt-Out

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

Mayer Brown is publishing its first edition of Licensing Link, a new periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this…