Overview

The implementation of Buy Now, Pay Later (BNPL) credit arrangements have flourished as an innovative consumer offering, particularly for the unsecured credit market. Understanding when and if the BNPL arrangement falls within or outside of the scope of regulation is key. Mayer Brown’s Fintech and Payments lawyers help clients understand their regulatory obligations and licensing requirements related to BNPL offerings, as well as how to navigate the processes and procedures to achieve compliance.

Our team also helps clients adapt their BNPL products around the evolving regimes coming from the US Consumer Financial Protection Bureau (CFPB) and US Federal Trade Commission (FTC) and develop structures to address regulatory risks in financing and acquisition transactions. Whether launching a new or adapting an existing BNPL program, responding to government inquiries or enforcement about a BNPL product, or financing or acquiring a BNPL business, Mayer Brown has deep knowledge and an experienced team to counsel and address clients’ BNPL needs.

Regulatory & Compliance
Mayer Brown is a leader in understanding and analyzing the key legal and regulatory issues that arise with the development and implementation of BNPL programs. Clients turn to Mayer Brown because our lawyers have intimate knowledge of the way in which decisions regarding BNPL program structure affect issues including the applicability of state licensing requirements and ongoing compliance obligations for BNPL providers. We regularly advise on state licensing and consumer lending and sales finance requirements, as well as federal consumer financial, consumer protection and (where relevant) banking laws that may regulate BNPL platforms, including the Truth in Lending Act; Equal Credit Opportunity Act; Electronic Fund Transfer Act; E-SIGN Act; Fair Credit Reporting Act; Bank Secrecy Act; Fair Debt Collection Practices Act; Gramm-Leach-Bliley Act and other consumer privacy and information security requirements; Telephone Consumer Protection Act; and standards regarding unfair, deceptive or abusive acts or practices under the Dodd-Frank Act, Federal Trade Commission Act and state law. Mayer Brown lawyers advise clients regarding compliance with these diverse laws throughout the entire product lifecycle from product development to product launch to ongoing operations to monetization events.

State lending laws applicable to BNPL programs vary across jurisdictions, requiring familiarity with the legal landscape in multiple states. Mayer Brown assists clients with identifying state lending licensing requirements, applying for such licenses, and structuring the program to comply with the state’s associated restrictions on, among other things, fees, maximum loan amounts and interest rates.

Laws applicable to BNPL programs also vary by business model. Our lawyers have deep experience evaluating business model alternatives, including programs implemented through loans, lines or credit, or retail installment sales, programs implemented with and without bank partnerships, and programs involving open-end or closed-end credit accessible by access devices that may be treated as “credit cards” for certain purposes under federal or state law.

Federal consumer lending laws overlay the patchwork of state consumer lending laws. Mayer Brown advises clients regarding compliance with these laws as well, including topics such as marketing and consumer solicitation, credit underwriting, consumer disclosures and agreements, and the servicing and collection of accounts after origination. Mayer Brown lawyers also have particular experience regarding the application of payment system and card network rules to BNPL platforms.

Financing
Mayer Brown lawyers leverage their extensive regulatory, compliance and capital markets experience to advise clients regarding the structuring and regulatory risks associated with financing BNPL providers. Mayer Brown lawyers have advised private equity firms, hedge funds and financial institutions regarding the extension of credit to several BNPL providers and have also advised on capital markets transactions. Additionally, Mayer Brown routinely represents BNPL companies in structuring transactions ranging from whole loan transactions to securitizations. In connection with a transaction, Mayer Brown lawyers conduct a detailed review of the BNPL platform’s financing structure, analyze compliance with state and federal laws and examine various other issues, including tax and securitization regulatory issues (in the United States and offshore) to advise clients regarding risks and potential mitigants presented by potential transactions.

Mergers & Acquisitions
We provide creative solutions to financial institution and fintech M&A transactions involving BNPL businesses by drawing on our extensive M&A and technology practices as well as our deep regulatory experience and knowledge of BNPL products. As a leading firm serving the financial markets, we offer our clients an integrated approach with a team of lawyers and other professionals with the knowledge, experience and judgment to handle all of the legal and regulatory aspects affecting buyers and sellers of BNPL and point-of-sale lending businesses.

Our Technology Transactions practice counsels clients on technology transactions to secure high-value contracts, improve operations, build digital platforms and achieve compliance. This highly regarded practice is an essential part of our Financial Institutions M&A offering, given the rapid rise of fintech solutions.

Enforcement & Investigations
Mayer Brown regularly represents banks, credit card issuers, prepaid card issuers, other providers of consumer financial services products (including related to BNPL platforms) in defending themselves in supervisory enforcement actions and other governmental audits, investigations and proceedings. We counsel clients facing examinations, investigations, administrative proceedings and lawsuits initiated by the CFPB, Federal Reserve Board, OCC, FDIC, HUD, state banking authorities and/or state attorneys general. We also defend clients in DOJ investigations involving alleged False Claims Act violations and FTC investigations involving alleged violations of the Federal Trade Commission Act and other federal consumer credit laws. The breadth and depth of knowledge of federal and state regulatory requirements that we bring, coupled with our experience with how consumer financial products providers operate within these requirements, enables us to communicate effectively with both regulators and our clients as we navigate complex enforcement matters.

 

 

Experience

Mayer Brown lawyers have been retained to advise clients in numerous recent engagements, including the following:

  • Afterpay in connection with warehouse financings from various banks and asset-backed commercial paper conduits.
  • A BNPL provider in connection with various state regulatory inquiries and investigations.
  • BNPL providers in connection with state licensing and regulatory restrictions on charging fees, including in connection with the transition of a program from a sales finance model to a direct lending model.
  • Regulatory counsel to various banks in connection with several financings of BNPL programs.
  • A large commercial bank in its potential sale of a leading point-of-sale lending business.
  • An online billing system in connection with the development and day-to-day compliance management of a card-accessible BNPL product.
  • An ecommerce fraud-prevention SaaS solution in connection with the design, launch and evolution of a BNPL program involving a combination of loan and sales finance structures.
  • An ecommerce fraud-prevention SaaS solution in connection with regulatory questions arising in equity raises.