May 19, 2025
As part of the New York State budget deal for fiscal year 2025-2026, New York enacted the Buy-Now-Pay-Later Act ("BNPL Act"), which was signed into law by Governor Kathy Hochul on May 9th. BNPL products typically allow consumers to pay for purchases at the point of sale in four or fewer installments at zero interest. The BNPL Act imposes licensing and examination obligations on BNPL lenders, even in connection with zero interest transactions. The BNPL Act expressly limits BNPL products to the state civil usury cap of 16% per year and mandates the Superintendent of the Department of Financial Services with setting other limitations on fees and charges.
The BNPL Act also expressly requires BNPL lenders to maintain a number of different policies and procedures, including underwriting policies and procedures that must be submitted as part of a licensing application. Factors considered in underwriting must also be disclosed to the consumer. The BNPL Act imposes other disclosure requirements and, notably, states that disclosures must comply with Regulation Z, which implements the federal Truth in Lending Act. TILA generally applies to consumer purpose credit transactions that provide for a finance charge and/or are payable in more than four installments. BNPL products, typically, do not provide for a finance charge and are payable in four or fewer installments.
Among other provisions, the BNPL Act also imposes dispute resolution standards and consumer data privacy protections.
The BNPL Act will take effect on the 180th day after the Department of Financial Services promulgates rules to effectuate the provisions of the Act.