NY: AFC Comment Letter to NYDFS BNPL RFI

September 13, 2025
The Honorable Adrienne Harris
New York State Department of Financial Services
1 State Street
New York, NY 10004

Re: New York Department of Financial Services’ Request for Information Regarding Buy-Now-Pay-Later Activities

Dear Superintendent Harris,

On behalf of The American Fintech Council (AFC),  I am submitting this comment letter in response to the New York Department of Financial Services’ (NYDFS or the Department) Request for Information Regarding Buy-Now-Pay-Later Activities (RFI).

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by fostering responsible innovation in financial services and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. Our members are also improving access to financial services and increasing overall competition in the financial services industry by supporting the responsible growth of lending and lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable financial products.

Buy-Now-Pay-Later (BNPL) is an emerging credit product that has been successful in offering consumers a low-cost alternative to traditional high-cost credit products. AFC members offer responsible BNPL loans that provide clear disclosures of terms in accordance with the principles of the Truth-in-Lending Act (TILA). Importantly, responsible BNPL lenders never charge late fees, hidden fees, or compounding interest, and their business models are aligned with consumers’ success. These practices ensure that lenders succeed only when their customers succeed. Additionally, BNPL providers, like traditional credit products, comply with federal laws, including the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA). That means, when consumers are denied credit, they receive a federally-required notice providing the reason that the creditor took adverse action related to the consumer's application.

AFC members have also worked closely with credit reporting agencies to ensure that BNPL loans are properly captured in consumer credit profiles As evidenced by the recent decision to include BNPL products in credit reporting and scoring, the industry recognizes the importance of ensuring that consumers’ usage of these products is properly captured and understood from a credit perspective.  This effort ensures more complete consumer credit histories, supports responsible lending decisions, and promotes positive long-term outcomes for consumers.

Further, AFC members offering BNPL loans work diligently to understand the risk profiles of the consumers they serve by underwriting each BNPL loan before making a credit decision. This dynamic, real-time approach helps ensure loans are manageable for the consumer and that payments are not set at levels that risk financial strain. As evidenced by a recent Consumer Financial Protection Bureau report, BNPL default rates from 2019 to 2022 remained below 3 percent.  As further noted by this report, “even with the increase in defaults during the holiday season,” which is historically a higher usage time for BNPL loans, “default rates on BNPL loans are lower than default rates on credit cards”.  Thus, the practices pursued by BNPL lenders ensure a safe and sound loan that offers consumers a low-cost alternative to higher-cost credit.

In May 2025, the New York State Legislature passed legislation that included a statutory framework for BNPL lending in the State of New York—henceforth referred to as the “BNPL Act”—and directed NYFS to implement regulations to effectuate a prudent licensure regime.  AFC appreciates NYDFS’s efforts to facilitate an open and productive dialogue on BNPL both before and after the passage of the BNPL Act. As NYDFS works to implement the BNPL Act’s provisions, AFC respectfully requests that the Department considers the following recommendations.

I. AFC Respectfully Recommends NYDFS Ensures BNPL Licensure is Properly Tailored to Only Capture BNPL Lenders

As codified, the BNPL Act underpinning the Department’s regulatory framework provides an overly expansive definition of BNPL loans, which, under a plain language interpretation, could expand the scope of the act to lending products that are not generally considered BNPL loans. In the BNPL Act, BNPL loans are defined as “closed-end credit provided to a consumer in connection with such consumer's particular purchase of goods and/or services” with limited exemptions for motor vehicle loans and “credit where the creditor is the seller of  such goods  and/or  services,  unless  it  is credit pursuant to an agreement whereby, at a consumer's request, the creditor purchases a specific good and/or service from a seller  and  resells  such  specific  good  and/or service  to  such  consumer  on  closed-end credit”.  While the BNPL Act further specifies that the definition of BNPL loan shall explicitly include both BNPL zero-interest loans and BNPL installment loans, it also allows the superintendent capture “[a]ny other subset of buy-now-pay-later loans the superintendent may classify as a separate category by regulation”.  As noted by the aforementioned CFPB report, BNPL loans are “generally defined as zero-interest loans repaid in four or fewer installments (“pay-in-four” loans)”.  Market participants generally agree with the CFPB’s definition of BNPL loans and further recognize that BNPL loans are a specific subset of closed-end credit that are offered to consumers at the point-of-sale in a retail trans.

Combined, the breadth of the above statutory definition for BNPL Loans and classifying authorities of NYDFS could result in the capture of closed-end lending products not generally considered BNPL loans in the market, such as home improvement loans, under the BNPL Act. In turn, the financial services companies that provide these loans would be improperly subjected to the regulatory framework established for BNPL loans, resulting in duplicative or redundant disclosure requirements. Without issuing guidance that properly narrows the definition of the specific types of loan products that are actually considered BNPL loans by NYDFS, lenders that do not offer BNPL loans as generally understood in the market will be subject to the myriad regulatory and licensure requirements codified in the BNPL Act. Therefore, AFC respectfully recommends that NYDFS properly tailor its regulatory framework to only capture those offering BNPL loans as generally understood in the market.

In addition, within the BNPL Act, while nationally chartered banks, credit unions, and trusts were explicitly exempted from the Act’s provisions, state-chartered financial institutions were not. AFC consistently advocates for parity between financial institutions to ensure that both nationally chartered and state-chartered financial institutions are able to partner effectively with fintech companies and operate in a fair, competitive market. The State of New York recognizes this fact within its statute and explicitly grants state-chartered banking institutions the ability “exercise any federally permitted power of its counterpart federally chartered banking institution” as enumerated under the statute.  Further, the statute establishing parity for federally-chartered and state-chartered financial institutions grants discretionary authority for the superintendent to “authorize one or more state chartered banking institutions to exercise a federally permitted power”.  While it is important to recognize that BNPL loans have generally been offered by nonbank fintech companies, AFC respectfully recommends that NYDFS ensure any regulatory framework pursued by the Department does not improperly disadvantage state-chartered financial institutions in their engagement with BNPL lending operations.

II. AFC Respectfully Recommends NYDFS Develop Disclosure and Fee Regulations that are Properly Tailored to BNPL Lending

As NYDFS engages in implementing the BNPL Act, it is important that the Department ensures that licensed BNPL lenders have a disclosure regime that is befitting of the product. AFC recognizes the importance of clear and conspicuous consumer disclosures, as well as applying the correct regulatory framework to innovative products and services. As AFC’s CEO previously noted in its testimony to the New York Assembly’s Committee on Banks and Committee on Science and Technology, “when considering how to regulate a specific fintech product or service, AFC believes that when technology is enabling an existing financial product or service to reach more consumers, the existing regulatory framework for similarly situated products is generally sufficient”.  While BNPL loans have operated as a viable alternative to credit card companies, as noted above, the two products operated differently regarding the type of credit that is being extended. The New York State Legislature recognized this fact in the BNPL Act and categorized BNPL loans as a form of “closed-end credit”.  These closed-end, installment loans, while unique in their delivery, fundamentally operate the same as other closed-end, installment loans. Therefore, as NYDFS carries out its regulations of BNPL loans, it should ensure that it does not misapply existing disclosure regimes, such as those prescribed to credit cards, to BNPL loans.

Further, NYDFS was granted authority to determine the types of fees that shall be used to calculate the interest rate associated with BNPL loans. AFC recognizes the importance of properly calculating and disclosing fees directly associated with the consumer. These fees directly impact the customer and should always be disclosed to them to ensure that they are properly informed. However, the business of offering BNPL loans also involves non-consumer fees. Specifically, merchant discount rates, which are analogous to interchange fees in credit cards, are carried by merchants who engage with BNPL lenders. Simply put, these fees are not passed onto the consumer and, as such, should not be understood or categorized in the same manner as consumer-facing fees, and therefore, should not be included in APR calculations. Thus, as the Department considers its regulations on BNPL loans, it should ensure that only consumer-facing fees, and not those carried by the merchant, are calculated in the permissible interest rate for BNPL loans.

III. AFC Respectfully Recommends NYDFS Allow BNPL Lenders the Ability To Operate Up To the Maximum Interest Rate Permitted in the State

AFC member companies have been crucial to expanding access to responsible credit, especially to communities that have been historically underserved in the financial services industry. Expanding access to credit has been made possible by leveraging technological innovations, as well as ensuring that a prudent regulatory framework for credit offerings exists. Notably, AFC fundamentally believes that credit regimes operate most effectively for consumers and industry participants who serve them when the permissible interest rate on a consumer loan is capped at 36 percent.

Under section 745 of the BNPL Act, NYDFS was granted authority to determine the maximum allowable interest rate for licensed BNPL lenders.  AFC recognizes and appreciates the various considerations that NYDFS must review when determining the interest rate that should be set for BNPL Loans. Specifically, while New York State’s civil usury rate is capped at 16 percent for many of its consumer loans, New York State’s law allows for a maximum interest rate permitted in the state is 25 percent.  Further, NYDFS previously issued a banking interpretation that specifically allowed licensed lenders of “small loans” the ability to offer loans not in excess of 25 percent interest.

In addition, licensure, and the regulatory oversight that accompanies it, provide regulators with the ability to ensure that licensees adhere to crucial consumer protections and are operating in a safe and sound manner. With the regulatory oversight and assurances of prudent practices afforded to regulators through licensure, licensees should be afforded some benefits, generally withheld from unlicensed entities, as a means of recognizing the inherent diminishing of risk that comes with oversight. Therefore, as NYDFS works to determine the maximum allowable interest rate for licensed BNPL lenders, AFC respectfully recommends that the Department consider allowing BNPL lenders the ability to operate up to 25 percent interest, the maximum interest rate permitted in the state, to enable the responsible extension of credit to as many consumers as possible.

IV. AFC Respectfully Recommends NYDFS Align Consumer Data Use Standards

The BNPL Act requires that consumers provide consent before their data may be used or shared by lenders. AFC supports the principle of transparency and accountability in the use of consumer data. At the same time, AFC urges NYDFS to adopt a framework that is both protective of consumers and practical in implementation. Specifically, AFC recommends an opt-out standard, consistent with Gramm-Leach-Biley Act (GLBA) and other existing federal frameworks, rather than an opt-in model.

* * *

AFC appreciates the opportunity to comment on the NYDFS’s Request for Information Regarding Buy-Now-Pay-Later Activities. Again, we deeply appreciate the efforts that NYDFS has done to foster responsible innovation in the State of New York and have productive conversations about the regulation of BNPL. We welcome continued engagement with NYDFS on how to implement regulations and guidance that encourage a robust, consumer protected BNPL lending ecosystem in New York. Thank you for your consideration of our views on this matter.

Sincerely,

Ian P. Moloney
SVP, Head of Policy and Regulatory Affairs
American Fintech Council

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[1]American Fintech Council’s (AFC) membership spans EWA providers, BNPL and other lenders, banks, payments providers, loan servicers, credit bureaus, and personal financial management companies.
[2]See, Patrick Cooley, “Affirm, other BNPL players ratchet up credit bureau reporting,” Payments Dive, (Mar. 24, 2025) and Laurel Wamsley, “'Buy now, pay later' purchases can now affect your credit score. Here's what that means,” NPR, (Jul. 5, 2025).
[3]Consumer Financial Protection Bureau, Consumer Use of Buy Now, Pay Later and Other Unsecured Debt, (Jan. 2025), Page 20, available at https://files.consumerfinance.gov/f/documents/cfpb_BNPL_Report_2025_01.pdf.
[4]Ibid., Page 15.
[5]Buy-Now-Pay-Later Lenders, New York State Budget, Session Laws 2025, Ch. 50, Art. 14-B (S03008, N.Y. State Senate).
[6]Ibid., § 736(3).
[7]Ibid., § 736(3)(a-c).
[8] Ibid., CFPB, Page 4.
[9]N.Y. Banking Law § 12-a(2).
[10] Ibid., (4).
[11] Impact of financial technology (Fintech) and its role in New York’s banking industry. Testimony before the New York State Assembly  Committee on Banks and Committee on Science and Technology, 2024, (The Honorable Phil Goldfeder, CEO, American Fintech Council), available at https://www.fintechcouncil.org/advocacy/american-fintech-council-new-york-hearing-written-testimony.
[12] Ibid., BNPL Act, § 736(3).
[13] Cite Sec. 745 of the BNPL Act.
[14] Cite civil usury rate in  New York Law.
[15] classified as a loan “that does not exceed a principal amount of $25,000 for an individual or $50,000 for a business”

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