New York sets BNPL regs into motion

New York state set into motion a regulatory regime for companies offering buy now pay later (BNPL) financing. Rules proposed on Feb. 24, 2026, would implement legislation signed by Governor Kathy Hochul in January 2026, establishing a formal regulatory framework for BNPL providers.

The New York law applies to both BNPL loans that have no interest or finance charges as well as installment loans that carry interest and finance charges. The regulations propose to implement the law by:

• Requiring BNPL lenders operating in the state to obtain licenses and submit to state supervision;

• Prohibiting excessive fees, including convenience charges, and limiting late fees and other types of penalty fees;

• Requiring lenders to make clear whether loans will be reported to credit reporting agencies;

• establishing rules for timely resolution of consumer disputes;

• Protecting consumer data from misuse or exploitation.

The state's action follows a decision in May 2025 by the Consumer Financial Protection Bureau to scrap planned BNPL regulations. Other states are expected to follow New York's lead.

"Too many New Yorkers have learned hard way that some buy now pay later products are designed to trip them up with junk fees and overly burdensome fine print instead of helping them build a stable financial future," Hochul said. "These new nation-leading regulations ensure that lenders know we have clear disclosures, limits on fees and real oversight so families don't get pushed into a debt spiral while big financial companies cash in."

"It is our responsibility to ensure that innovation is paired with strong consumer protections, so New Yorkers can safely and securely use new financial products," said Kaitlin Asrow, acting superintendent of the New York State Department of Financial Services.

This regulation, Arrow added, will govern how by now, pay later companies operate in the state, protecting New Yorkers from excessive fees and the misuse of personal data, while ensuring transparent loan terms and a fair process for resolving disputes.

A template for other states

"New York's proposed buy now, pay later regulations would provide the strongest, most comprehensive protections for consumers of any state and are a model for lawmakers across the country," said Chuck Bell, special projects director at Consumer Reports. "These proposed rules would help make sure that lenders don't extend credit that consumers cannot afford to repay, charge only reasonable fees, protect data privacy, and treat borrowers fairly when they dispute charges and seek refunds."

"Many buy now pay later users have subprime credit scores and high debt loans making BNPL loans risky, so it is critical that states step up to fill the gaps in consumer protections," said Lauren Saunders, associate director of federal advocacy at the National Consumer Law Center. She added that the New York law and proposed regulation offer a blueprint for protecting shoppers nationwide.

The NCLC issued a brief earlier this month that shows how other states can adapt and build on the New York Buy-Now-Pay-Later Act. It offered 13 areas that state BNPL laws and/or regulations should address. These are:

1. The different types of BNPL loans
2. Clear disclosures
3. Fees and interest limits
4. Responsible underwriting for ability to repay
5. Repeat debiting that triggers overdraft fees
6. Credit reporting and data sharing
7. Refunds, disputes and errors
8. Easy cancellation of subscriptions, such as "click to cancel"
9. Unfair, deceptive or abusive practices
10. Fair lending
11. Language access
12. Consumer remedies
13. Access reports

A small but growing market

BNPL offerings have become increasingly popular in recent years, although these loans remain a fraction of credit card spending. In a Feb. 11, 2026, brief published by the Federal Reserve Bank of Richmond, the value of BNPL loans, measured in real terms, has been growing at about 20 percent per year since 2021, reaching an estimated $70 billion in 2025, or about 1.1 percent of total credit card spending. The CFPB has noted that while many consumers report positive experiences with BNPL, borrower complaints have risen steadily since 2021. Most of the complaints have involved the lack of timely assistance with returns and refunds. Data also shows that some consumers are getting into unaffordable debt with BNPL credit products.

Twenty-six percent of BNPL U.S. users surveyed last year by Motley Fool said they regretted using the financing option once they realized what they actually ended up owing. One in five surveyed users said they had lost track of upcoming payments, and 29 percent made payments late. Motley Fool also found that 57 percent of consumers who use BNPL do so to purchase things they can't afford.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.