Today, the Consumer Financial Protection Bureau (CFPB) issued new interpretive guidance relating to Buy Now, Pay Later regulations in the US. From our initial read, this announcement does not require any major changes to Klarna’s business and we consider today’s announcement to be a significant step forward in getting BNPL regulation in place in the US.

We have long supported and called for bespoke, proportionate BNPL regulation that fits the unique nature of the products, fosters innovation and ensures consumer protection for years. It is baffling that the CFPB fails to acknowledge the fundamental differences between BNPL and credit cards in their guidance and this announcement does nothing to address the $1.15 trillion in credit card debt.  

Guidance compares apples with oranges

Trying to regulate BNPL like a credit card is like comparing apples with oranges. So today’s announcement is confusing. Klarna is already working to a high standard in investigating disputes, pausing payments, providing consumers with comprehensive billing statements. More information on some of these services can be found in our Buyer’s Protection policy. 

Different products, different protections

Over the last several years we have seen governments across the world, from Australia to the United Kingdom, recognize the fundamental differences between credit cards and BNPL products, therefore decide to create a proportionate regulatory framework that fits the consumer needs.

Credit cards typically allow users to borrow up to a predetermined limit, are underwritten at a moment in time, and charge revolving interest on unpaid balances. They typically come with various fees, including annual fees, and interest charges that can accumulate if the balance isn't paid off each month. Leading to debt of over $1 trillion and rising in the US.

Next steps

It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways. Klarna’s BNPL is short-term, no interest credit with no fees when paid on time. At Klarna, we underwrite every transaction to ensure we only lend to consumers who can pay us back, proven by our global defaults of 1%. This model provides consumers with a transparent and predictable repayment structure, making it easier to manage their finances without the burden of accumulating interest.