The Buy Now, Pay Later Fight Was About a Label, Not Repayment

The buy-now-pay-later industry in the United States just won a regulatory fight, and the victory is stranger than it looks. In May 2024, the Consumer Financial Protection Bureau issued an interpretive rule treating BNPL accounts as credit cards under the Truth in Lending Act, bringing billing statements, dispute rights, and refund protections to millions of small installment loans. By May 2025 the bureau had withdrawn the rule and left the product without a dedicated federal regime. As American Banker reports, industry executives are now studying European and British regulation for guidance.

The strangeness is this: the industry fought for freedom from federal rules, and it is now spending that freedom asking what the rules say. The explanation is not humility. Everyone had the fight over the wrong question, and the market is about to ask the right one on its own.

The rule that was repealed, and what it covered

The 2024 interpretive rule had one job: it decided what to call the product. Because many BNPL arrangements rely on digital user accounts, the bureau said, they are credit cards under Regulation Z, and providers are card issuers. From that label flowed a set of mechanical obligations: periodic statements, billing disputes, refunds for returned goods, limits on liability for unauthorized use.

The industry's trade group, the Financial Technology Association, sued in October 2024, arguing the rule skipped notice-and-comment and fit closed-end installment loans into rules designed for revolving accounts. The bureau's retreat conceded much of that case. In March 2025 it told the court it planned to revoke the rule; in May it said enforcement would not be a priority; and on May 12 it formally withdrew the interpretive rule, whose current status its compliance pages describe. Its justification: open-end credit rules provided little benefit to consumers of short installment credit while imposing a real compliance burden.

Whatever one thinks of that outcome, and this analysis takes no position on whether the rule should have been kept, the shape of the fight deserves notice. Both sides argued about a label: is this product a credit card or not? What neither side made the subject of the dispute was the question that determines whether BNPL is safe for the people who use it: whether the borrower can repay the debt, and what happens when the borrower cannot.

Europe made the skipped question the center of the law

The European regime US firms are now studying is built around exactly that question. The revised EU Consumer Credit Directive, adopted in 2023 and enforceable from November 20, 2026, explicitly brings BNPL into consumer credit law, including small and interest-free arrangements. Its centerpiece is a systematic affordability assessment. Lenders must evaluate income, expenses, and existing liabilities against up-to-date, objective data, not a self-declaration, and may grant credit only when there is no significant doubt about repayment. Automated decisions must be reviewable by a human on request, and the rules ban the use of sensitive data and social-media profiles in scoring.

Britain's regime is similar and further along. The Financial Conduct Authority's rules for deferred payment credit, in force since July 15, 2026, require a proportionate affordability check on every transaction, including purchases under £50, clear pre-contract information about payment dates and missed-payment consequences, and access to the Financial Ombudsman Service for complaints. The regulator has said no one should be lent to if it would worsen their situation, and its own analysis suggests more than a million people could lose access once the checks bite.

Notice the inversion. The American debate was about what to call the product, and it ended with the product unnamed. The European debate was about whether the borrower could pay, and it made that the law. The thing excluded from the US measure is the thing the Europeans made the whole measure.

The data point to the same conclusion

The US market's own numbers say affordability is the load-bearing question. The CFPB's December 2025 market report found an average loan of $135 in 2023, with six providers originating 335.8 million loans worth $45.2 billion and the average user taking 6.3 loans, repeated small-balance borrowing the credit bureaus barely register. Late fees attached to 4.1% of loans, and charge-offs fell to 1.83% from 2.63% the year before, an improvement the bureau credited in part to tighter underwriting.

That finding is the quiet tell. When providers underwrote more carefully, performance improved, and underwriting is precisely what neither the 2024 rule nor its repeal addressed. The rule was about statements and disputes; the repeal, about the burden of them. Neither touched the repayment decision that decides whether the product works.

The incentive structure explains why the fight looked that way. The industry did not want credit checks at the checkout. Consumer advocates pressed within the frame the card rules offered, on disputes and refunds rather than on income verification. The result was a war over the label while the borrower's finances went unregulated.

The market is importing the standard the politics rejected

Here is the turn that makes the industry's new interest in Europe coherent: the US market is converging on Europe's answer anyway, not because any law requires it, but because the product's own growth does.

Juniper Research projects BNPL users will grow 107% by 2028, from 380 million to more than 670 million, and American Banker cites its forecast of 77% growth in US digital BNPL transaction value from 2026 to 2031. The product itself is changing shape. Javelin Strategy & Research's Brian Riley, quoted in the piece, says that as volumes scale, "you need to invoke good credit judgment on the account," and he points to Affirm's partnership with Apple as evidence that BNPL is moving toward larger-ticket items, with loans near $1,200 and terms of two to four years.

A four-payment loan of $135 can tolerate thin underwriting; the losses are small. A $1,200 loan spread over three years cannot: longer terms mean real interest-rate exposure and defaults that cost real money. At that size the no-check checkout becomes a loss problem, and loss problems get solved the way they always do, with income checks and limits on what can be borrowed, the affordability standard Europe wrote into law. PayPal and Amazon, which American Banker notes launched BNPL in Germany and Austria in August, already operate inside the European regime.

The analysts in the piece put the point in competitive terms: Datos Insights argues the European rules erode the nonbank advantage of skipping stringent creditworthiness checks, leveling the field for banks. The advantage the industry fought to preserve in the United States, freedom from underwriting obligations, is being withdrawn by the market itself, at the moment ticket sizes make underwriting necessary.

So when US firms say they are looking to Europe for guidance, they are reading the manual for the world their own growth has already created. Deregulation settled the label. The market is settling the substance, on Europe's terms, with loss rates as the enforcement agency and no statute in sight.

Who carries the cost of the gap in between

Between the label fight and the market's arrival there is a gap, and the cost of the gap is not paid evenly. While the product outgrows its underwriting, the borrower still owes the money, and the dispute protections the 2024 rule would have guaranteed now rest on whatever the fine print says. States are filling the void unevenly. New York signed the nation's first BNPL licensing law in May 2025, with a 16% interest cap, disclosure requirements, and a billing-dispute process under its banking regulator's oversight, and the National Consumer Law Center published a February issue brief urging other states to follow. A patchwork of fifty regimes is a real cost in itself, paid by providers and eventually by borrowers in narrower choices and higher prices.

The deregulation case deserves its full due as well. BNPL loans are mostly interest-free, short, and closed-end, and the revolving-credit machinery really is a poor fit. Compliance is expensive. The interpretive rule may well have been the wrong instrument; nothing here settles that political fight.

But the structural point does not depend on it. The question that decides whether the product is safe, whether the borrower can repay, was never the subject of the fight, and it is now being answered by the market, the states, and the European rulebook. The industry that fought for deregulation is now asking Europe how to do the thing deregulation left undone.

The story of an industry looking to Europe for guidance flatters everyone involved. Read plainly, the guidance it seeks is the answer to the question the American fight never asked, because the market is asking it now, at the point of a loss statement. The label fight is finished, and the repayment fight is just beginning. Its venue will not be the statute book but the checkout screen, where the question excluded from every US debate, can this borrower repay, arrives one loan at a time.

Primary sources

1. American Banker's Cheryl Winokur Munk for the framing that US BNPL firms are studying European and British regulation after the CFPB's reversal, and for the figures and views she collected, including Juniper Research's forecast of 77.1% growth in US digital BNPL transaction value from 2026 to 2031, Javelin's Brian Riley on loans near $1,200 with terms of two to four years, Datos Insights on banks gaining ground, and the PayPal and Amazon BNPL launches in Germany and Austria in August 2026.
2. The Consumer Financial Protection Bureau for the May 2024 interpretive rule, the May 2025 withdrawal, and the December 2025 data spotlight, including the average loan of $135 in 2023, 335.8 million loans totaling $45.2 billion, 6.3 loans per user, late fees on 4.1% of loans, and charge-offs down to 1.83% in 2023 from 2.63%, with the bureau crediting tighter underwriting.
3. EUR-Lex for the text of Directive (EU) 2023/2225, applicable from November 20, 2026, with its affordability-assessment requirements, and the UK Financial Conduct Authority for its deferred payment credit regime in force since July 15, 2026, with affordability checks on every transaction and Ombudsman access.
4. Juniper Research's press release for the projection of 107% user growth by 2028; Consumer Finance Monitor for New York's Buy Now, Pay Later Act signed May 9, 2025; and the National Consumer Law Center's February 2026 issue brief.