Marketplace Lending

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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…

Marketplace lender Opportunity Financial, LLC has gone on the offensive against the California Department of Financial Protection and Innovation to protect its bank partnership program against challenge on a “true lender” theory. On March 7, 2022, OppFi filed suit against the DFPI to ask the state court to declare that FinWise Bank, a Utah-chartered bank,…

On Thursday (March 26, 2021), Senator Chris Van Hollen (D-MD) introduced a Congressional Review Act (CRA) resolution of disapproval to invalidate the Office of the Comptroller of the Currency’s (OCC) true lender rule. The resolution is co-sponsored by Senate Banking Committee Chair Sherrod Brown (D-OH) and Senators Jack Reed (D-RI), Elizabeth Warren (D-MA), Catherine Cortez-Masto (NV), Tina Smith (D-MN), and Dianne Feinstein (D-CA). Rep. Chuy Garcia (D-IL) participated in the introduction of the resolution, signaling support for the resolution by House Democrats. The Biden Administration has not yet stated its support for the resolution, though President Biden is likely to sign the resolution into law if Congress passes it.

With the statutory deadline for Congress to take up the resolution of disapproval quickly approaching in approximately mid-May, Congress will have to either pass the resolution when it returns in April from its two week recess, or effectively defer to President Biden’s future Comptroller of the Currency to determine the future of the rule. Given the Democrats’ narrow majorities in both houses of Congress, the vote on the resolution is expected to be close with possible defections on both sides of the aisle. If Congress does not pass the resolution by the statutory deadline, the new Comptroller of the Currency could still seek to repeal or modify the rule at a later date. President Biden has not yet announced a nominee for Comptroller.
Continue Reading Congress Prepares to Invalidate OCC’s True Lender Rule

On Friday, the United States Office of the Comptroller of the Currency (“OCC”) finalized a regulation regarding the “Permissible Interest on Loans that are Sold, Assigned, or Otherwise Transferred” by national banks and federal savings associations. Initially proposed in November 2019, the regulation provides that interest on a loan that is permissible under provisions of federal banking laws establishing the interest authority of national banks and federal savings associations is not affected by a sale, assignment, or transfer of the loan—effectively permitting subsequent holders of loans originated by OCC-regulated entities to take advantage of the originators’ “Interest Exportation Authority.” The rule will be effective 60 days after publication in the Federal Register.
Continue Reading The OCC Finalizes “Madden Fix” Regulation, Codifying the “Valid-when-Made” Doctrine as Applicable to Loans Made by National Banks and Federal Savings Associations