On November 2, the House Financial Services Committee’s Task Force on Financial Technology held a hearing titled, “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products.” For the hearing, the task force invited both consumer advocates and industry tradespeople to address several products, including buy now, pay later (BNPL); earned wage access (EWA); and overdraft protection products. The task force’s primary concern is that these products — particularly BNPL — are designed in such a way that the disclosure requirements under the Truth in Lending Act and other credit laws may not apply.

BNPL programs are designed to allow consumers to purchase goods and to defer payment over a short term with little to no interest, but with the potential for fees in the event of nonpayment. Notably, Committee Chairwoman Maxine Waters asked several questions regarding BNPL programs, including whether providers conduct any sort of “ability to repay” analysis. Some representatives also voiced concerns that some BNPL providers do not report to the credit bureaus, resulting in an invisible obligation for the consumer that does not help their credit file.

EWA programs allow individuals to access their earned but not yet paid income in advance of their scheduled payday. In late 2020, the CFPB gave its blessing through an advisory opinion to certain types of EWA programs, as long as they were structured a certain way. Specifically, programs covered under the advisory opinion are offered through employers directly, and the consumer is not required to pay to access the EWA funds.

Overdraft protection products are intended to help consumers avoid bank overdraft charges on their accounts. A provider will gain access to the consumer’s bank account to monitor activity and will deposit money into the consumer’s account to prevent overdraft fees. Some providers offer the product for free and allow the consumer to “tip” for the service, while others may offer the protection as part of a membership plan that may also include cash advance services.

The focus on alternative financial products is not going away anytime soon. According to the task force’s research, BNPL use has increased 230% since early 2020, while the EWA market stands at 45 million users.

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Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance…

Alan Wingfield is a partner in the firm’s Consumer Financial Services practice, with a focus on Financial Services Litigation and consumer law compliance counseling. Alan has represented businesses in many venues nationally in class action and individual consumer litigation. Alan’s practice includes compliance counseling to help businesses with the myriad federal and state consumer protection laws and laws regulating financial services companies.

Photo of James Stevens James Stevens

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory…

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory reporting and compliance. He often serves as the principal outside counsel for these clients.

Photo of David N. Anthony David N. Anthony

David is an experienced trial attorney with a concentration in litigating financial services and business disputes, including class actions related to the FCRA, FDCPA, TCPA and other consumer protection statutes.

Photo of Chris Capurso Chris Capurso

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and…

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and other credit programs. He provides guidance on federal consumer protection laws and regulations, including TILA, ECOA, ESIGN, and GLBA.