When New York state lawmakers went home at the end of their legislative session in June, an effort to pass new state regulations for the fledgling buy now, pay later industry ended, at least for this year.

New York Gov. Hochul kicked off the campaign to impose new regulations on the industry when she proposed legislation in January that would require BNPL providers to obtain a license to operate in the state. It was part of the Democrat’s efforts to strengthen state consumer protections.

The version of BNPL that’s most widely marketed to consumers by providers is an interest-free, pay-in-4 plan. Those offers allow consumers to make an initial payment when they buy an item, followed by three more payments, typically spread over six weeks.

Her proposal got the industry’s attention, and ultimately that of legislators, who offered diverging proposals to regulate the industry. While BNPL companies play up their no-fee offerings, some providers do charge interest fees for some services, and some may also charge late fees. 

In March, a group of Democrats in the Assembly introduced a bill that countered the governor’s, presenting an alternative attempt to install parameters and consumer guardrails on the young payment method. Assembly member Pamela Hunter, who chairs the banks committee, was among the legislators who introduced Assembly bill 9588.

In May, New York Sen. James Sanders, another Democrat and chair of that chamber’s committee on banks, introduced legislation, Senate Bill 9689, also aimed at licensing BNPL providers. A spokesperson for Sanders’ office didn’t immediately respond to a request for comment.

Both bills sought to institute consumer protections, such as fee limits, disclosure requirements, dispute resolution parameters, credit reporting standards and data privacy terms.

“The main issue was there wasn’t enough time at the end of the session to work out the different versions of the bill," said Jamus Socker, a legislative coordinator in Hunter's office. "We’re going to spending this summer meeting with stakeholders and meeting with senate staff so we can the bill ready for next year."

The American Fintech Council, an industry trade group that represents fintech companies, including BNPL player Affirm, weighed in on the legislative dialogue, said the AFC’s CEO, Phil Goldfeder.

“We had opinions and thoughts on all three” bills, Goldfeder said in an interview last Friday. The council even threw a fourth variation into the mix, he said.

The industry backs increased transparency, better options for working with credit bureaus and improved ways of meeting consumers’ credit needs, Goldfeder explained. Generally, it’s about finding a balance of responsible access to credit while not compromising on consumer protection, he added.

All the versions of the bill were different, with different priorities, Goldfeder said. The council’s goal was to bridge the gaps and, given more time, a mutual agreement likely could have been reached, he said. Everyone wanted “responsible legislation,” but the diverging versions just couldn’t be reconciled before the legislative session ended, he explained.

It’s possible they’ll be more successful next year. People who participated in the legislative attempt this year are eager to pick up the conversation again in 2025, Goldfeder said.

By Lynne Marek on July 2, 2024
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