Digital Transactions Authoritative, insightful and timely information for payments professionals
New York Governor Kathy Hochul late Monday unveiled new rules to regulate buy now, pay later lenders in the state. The proposed regulations, the governor says in a statement, are intended to protect residents of the state from excessive BNPL fees and the misuse of personal data, and require greater disclosure from BNPL lenders about the terms of their loans. The proposed regulations are part of Hochul’s 2026 fiscal budget, which passed last May.
The proposed regulations could require BNPL providers to clearly disclose if loans will be reported to credit reporting agencies and establish rules for timely resolution of consumer disputes. In addition, the regulations prohibit excessive fees, including convenience charges, and limit the charging of late fees and other financial penalties.
“Too many New Yorkers have learned the 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 says in a statement. “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.”
BNPL loans have become a highly popular payment option since the Covid 19 pandemic. Some 97.3 million consumers in the United States, or 42% of all digital buyers, are predicted to take out BNPL loans in 2026, according to research firm eMarketer. Despite the rapid growth of BNPL loans, regulation of the industry has not kept pace, especially since the Consumer Financial Protection Bureau dialed back its oversight of the BNPL industry, says Grace Broadbent, senior analyst for the Payments team at eMarketer.
“The industry is operating without a consistent federal framework,” Broadbent says by email. “New York is looking to fill this void with the newly proposed rules, establishing critical consumer safeguards like timely dispute resolution, limits on fees, data privacy protections, and clear credit reporting.”
One reason BNPL lenders need to be regulated is that they are operating “in a regulatory gap” for providing access to a credit product with none of the “protections or disclosures” that typically come with credit, says Deborah Baxley, a U.S. Payments Forum Steering Committee Member partner at PayGility Advisors, a New York-based management consulting firm, says by email.
“The pay-in-four, no-interest structure was engineered to fit under [the Truth in Lending Act’s] triggers of more than 4 payments or finance charges…New York’s new rules are the first serious attempt to close [the regulatory gap],” Baxley says by email.
While New York’s efforts to fill the regulatory BNPL gap is seen as a positive, leaving states to provide regulatory oversight can prove problematic in the long run as it creates a tangled web of regulation for the BNPL industry to navigate.
“A patchwork of state laws will only further add confusion for consumers, merchants, and BNPL providers alike,” Broadbent says. “A unified national framework is still urgently needed.”
That patchwork of potential state-by-state licensing could result in increased compliance costs, Baxley says. “New York just became the de facto national template. The seven-state [attorneys general] coalition are filling the vacuum (Connecticut, North Carolina, California, Colorado, Illinois, Minnesota, and Wisconsin) by pressing the six largest BNPL providers on the same issues.”
