Summary#
A-5664, the Buy Now Pay Later Act, would create a new law supplementing Title 17 of New Jersey’s Revised Statutes; it does not name an existing Act that it would amend. Its stated goal is to regulate buy now, pay later (BNPL) lenders and protect consumers. It has been introduced and is not law; whether it will pass is uncertain.
- Most BNPL lenders would need a license from the Commissioner of Banking and Insurance. Certain banks and other exempt organizations would be exempt; some other banks and lenders would instead need the commissioner’s written authorization.
- The commissioner would set capital requirements and maximum interest, fees, and charges for categories of BNPL loans. The bill does not set those amounts itself.
- Lenders would have to disclose loan terms, use reasonable risk-based underwriting, keep records, and provide ways to dispute charges and seek eligible refunds. They could not use members of a borrower’s social network to assess the borrower’s creditworthiness.
- Lenders would generally need a consumer’s consent to use, sell, or share data beyond making that consumer’s particular loan. Consumers could withdraw consent, after which the lender would have to delete the data, subject to stated exceptions.
- Loans made by a non-exempt lender without a required license or authorization would be void, and the lender could not collect the principal, interest, or charges. The bill also allows regulatory penalties and private court actions.
What it means for you#
- New Jersey consumers: If you use a BNPL loan covered by the bill, lenders would have to clearly disclose costs, payment schedules, credit-reporting practices, and how to dispute a bill. They would have to provide fair refund and dispute processes, and the bill would apply specified federal credit-card dispute and unauthorized-charge protections to these loans, even if federal law would not otherwise cover them.
- Consumers and their data: A lender could not make consent to unrelated data use a condition of receiving a loan. The bill allows certain uses under the federal Fair Credit Reporting Act and furnishing data to credit reporting agencies.
- BNPL lenders and platforms: The rules cover businesses that lend directly and businesses operating platforms whose primary purpose is letting third parties offer BNPL loans. Lenders would need to meet licensing or authorization, recordkeeping, reporting, disclosure, underwriting, and other requirements. Records must be kept for at least seven years after the final entry for a loan.
- Banks and other lenders: Some named types of financial institutions are exempt. Other banking organizations and lenders licensed under New Jersey’s Consumer Finance Licensing Act would need prior written authorization for the categories of BNPL loans they offer.
- Consumers who sue: A person could bring an action for a violation on their own behalf, for similarly situated consumers, or for the public. If a court finds a violation, the bill calls for damages of three times the loss or $1,500, whichever is greater, plus reasonable legal and court costs.
- General public: The bill covers closed-end credit for a New Jersey resident’s particular purchase, but excludes motor-vehicle purchases and, generally, credit from the seller—except in a specified arrangement where the creditor buys and resells the particular good or service.
Money#
No publicly available information on the bill’s total public cost, lender compliance costs, or expected fee revenue.
- Applicants would pay fees set by the commissioner. The bill also allows an investigation fee for a proposed change in control of a licensee.
- The commissioner would have to create and administer licensing, authorization, supervision, and rulemaking processes. The bill provides no staffing or cost estimate.
- The commissioner would set capital requirements and limits on interest, fees, and charges. The bill gives no figures for those limits or for regulatory penalties.
What is unclear#
- The bill leaves many details to future regulations, including capital requirements, fee and interest limits, underwriting standards, and parts of the licensing and authorization process.
- It does not set deadlines for license decisions, explain appeal rights for denied applications, or give a detailed process for consumer complaints.
- Terms such as “reasonable risk-based underwriting” and “unduly burdensome” are not defined in the bill.
- The supplied material does not include the current laws that may already apply to BNPL loans. I could not verify how this bill would interact with those laws or with existing programs.
- The bill would take effect one year after enactment and apply to agreements made on or after that date, but no enactment date is known because the bill is not law.
Case for#
- The bill appears intended to address consumer risks by requiring clear loan disclosures, fair dispute and refund processes, and limits on charges.
- Licensing, financial review, capital requirements, and regulatory examinations could give the state tools to oversee lenders and assess their financial stability.
- Applying specified credit-card dispute protections to BNPL loans could give consumers protections even where federal rules do not otherwise apply.
- Consent and deletion rules could limit uses of consumer data unrelated to making a particular loan.
Case against#
- Many key limits and safeguards would depend on rules the commissioner has not yet written, so consumers and lenders would not know the full requirements from the bill alone.
- Licensing, reporting, recordkeeping, and underwriting requirements could add costs for lenders; the bill gives no estimate of those costs.
- A loan made without required authorization would be void, and a private action could lead to damages of at least $1,500 or three times the loss. Those consequences could be significant, while the bill leaves important compliance details to later rules.
- The bill does not explain in detail how its new protections would fit with existing state and federal laws, which the commissioner is directed to consider when making rules.