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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 Iowa and Puerto Rico have had longstanding opt-outs; certain other states initially opted out but later repealed such opt-outs; and Colorado enacted an opt-out that would have become effective July 1, 2024 but for litigation by industry participants that resulted in the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

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

On February 23, 2024, the Consumer Financial Protection Bureau published an order establishing supervisory authority over a small-loan consumer finance company, using a Dodd-Frank Act provision that allows the Bureau to supervise certain nonbanks that it has reasonable cause to determine pose risks to consumers.

In Mayer Brown’s Legal Update, we summarize relevant aspects…

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…

The CFPB marketed its latest set of supervisory highlights as the “Junk Fees Special Edition.” The splashy headline is consistent with the agency’s recent focus on fees that it asserts are hidden from the competitive process. In speeches, press releases, and blog posts (and now a single proposed rule), the CFPB has stressed its growing concern with “junk” fees. The CFPB even created a section of its web site solely devoted to press releases on “junk” fees.

Gleaning compliance guidance from Supervisory Highlights is not always straightforward, as they do not provide full details. However, in this Special Edition, the CFPB notes that it has characterized the following types of fees and practices as junk:

Deposit Accounts

  • Overdraft Fees – specifically, those charged when the consumer had a sufficient balance when the financial institution authorized the transaction, but not at the time of settlement.
  • Multiple Non-Sufficient Funds Fees for the Same Transaction.

Auto/Title Financing

  • Late Fees that Exceed the Credit Contract or After Acceleration/Repossession.
  • Estimated Repossession Fees that Greatly Exceed Average Costs – even if the excess was refunded.
  • Payment Processing Fees – specifically, those that exceed processing costs, when free payment options are only available for checks or ACH transfers.
  • Fees to Retrieve Personal Property from Repossessed Vehicles – the CFPB said such fees were “unexpected” and unfair.
  • Premature Repossession and Related Fees – charging late fees and repossessing vehicles before title loan payments became due.

Mortgage Loan ServicingContinue Reading CFPB Junk Fees Special Edition

In February 2022, a legal opinion issued by the California Department of Financial Protection and Innovation (“DFPI”) concluded that employer-provided earned wage access (“EWA”) transactions are not loans under the California Financing Law and California Deferred Deposit Transaction Law.  The DFPI’s legal opinion stands to provide significant clarity to the EWA industry and should encourage the continued adoption of earned wage access as a solution to employees’ needs for low-cost temporary liquidity.

Before diving into the DFPI legal opinion, we briefly remind readers of the basic structure of EWA programs.  Earned wage access is a service that allows workers to obtain wages that they have earned, but have not yet been paid, prior to the worker’s regularly scheduled payday.  Although the exact structure of each program differs, EWA programs generally fall into two broad categories:

  • Direct To Consumer Models are offered directly to workers, without the employer’s involvement.  Any eligible worker can access EWA from a direct to consumer model, as the worker’s employer offering the service is not a prerequisite.  Because direct to consumer models do not integrate with employers, recoupment of EWA advances is typically effected through a single-use automated clearinghouse transaction from the employee’s personal bank account on the employee’s payday.
  • Employer Integrated Models involve the EWA provider entering into a contract with an employer to offer the service as an employee benefit to the employer’s employees.  An EWA provider using the employer integrated model may integrate with the employer’s payroll and time card systems to receive data about the amount of earned wages that an employee has accrued as of a certain date.  Employer integrated programs typically fund an earned wage advance through the employer’s payroll system and then recoup the advance through a payroll deduction facilitated by the employer on the employee’s next regular payday.

Some EWA providers charge fees for use of the service, which are typically either flat transaction fees or “participation” fees for use of the program.

As an innovative and emerging product, EWA programs present novel financial regulatory issues.  The most significant of these issues is the status of an EWA transaction as a non-credit transaction.
Continue Reading California DFPI Affirms Employer-Integrated Earned Wage Access Is Not a Loan

Nearly four years after the Consumer Financial Protection Bureau (“CFPB”) first promulgated its rule regulating payday loans, a federal district court in Texas upheld the payment provisions of the rule against various constitutional and other challenges. The court, which had previously stayed the rule’s original compliance date, also provided that the provisions would become effective in 286 days—on June 13, 2022.
Continue Reading CFPB Payday Rule Upheld

Along with other federal agencies, the Consumer Financial Protection Bureau recently released its Fall 2019 regulatory agenda, announcing its intentions over the next several months to address the GSE QM Patch, HMDA, payday/small dollar loans, debt collection practices, PACE financing, business lending data, and remittances. Over the longer-term, the CFPB indicated it may even address feedback on the Loan Originator Compensation Rule under the Truth in Lending Act.

  • Qualified Mortgages. As we have previously described, the CFPB must in short order address the scheduled expiration of the temporary Qualified Mortgage status for loans eligible for purchase by Fannie Mae or Freddie Mac (often referred to as the “Patch”). The Patch is set to expire on January 10, 2021, leaving little time to complete notice-and-comment rulemaking, particularly on such a complex and arguably controversial issue. The CFPB has indicated that it will not extend the Patch, but will seek an orderly transition (as opposed to a hard stop). The CFPB asked for initial public input over the summer, and announced that it intends to issue some type of statement or proposal in December 2019.
  • Home Mortgage Disclosure Act. The CFPB intends to pursue several rulemakings to address which institutions must report home mortgage data, what data they must report, and what data the agency will make public. First, the CFPB announced previously that it was reconsidering various aspects of the 2015 major fortification/revamping of HMDA reporting (some – but not all – of which was mandated by the Dodd Frank Act). The CFPB announced its intention to address in one final rule (targeted for next month) its proposed two-year extension of the temporary threshold for collecting and reporting data on open-end lines of credit, and the partial exemption provisions for certain depository institutions that Congress recently enacted. The CFPB intends to issue a separate rule in March 2020 to address the proposed changes to the permanent thresholds for collecting and reporting data on open-end lines of credit and closed-end mortgage loans.

Continue Reading CFPB Announces its Fall 2019 Regulatory Agenda