The Bank Slate


OCC emphasizes risk management in BNPL guidance

The Office of the Comptroller of the Currency issued guidance that focuses on the risk management tied to Buy Now, Pay Later (BNPL) platforms.

The guidance, which applies to national banks and federal savings associations, emphasizes the importance of underwriting, repayment terms, pricing and safeguards to minimize “adverse customer outcomes.”

“Supporting a fair and inclusive financial system is a priority for the OCC and is critical to maintaining trust in the banking system,” Acting Comptroller Michael Hsu said in a press release.

“As the buy-now-pay-later market grows and we enter the holiday shopping season, the guidance confirms our expectation that OCC-supervised institutions offering these products do so in a responsible manner.”

While the OCC noted that BNPL offers financing support for consumers, it warned that a lack of standardized disclosures could present challenges for people using those platforms.

“Existing credit scoring systems are not designed to capture the very short-term nature and structure of BNPL loans,” the guidance added. “Incomplete reporting of BNPL loans could make it difficult for lenders to know the total dollar amount of debts and other obligations that applicants have before determining whether to approve them for new credit.”

The guidance also made it clear that OCC-regulated banks should consider how their platforms comply with the Equal Credit Opportunity Act and Reg B; the Fair Credit Report Act and Reg V; the Electronic Funds Transfer Act and Reg E. It also referenced the Federal Trade Commission Act (UDAP) and the Consumer Protection Act (UDAAP).

The Consumer Financial Protection Bureau has stated that lenders should treat BNPL loans like credit cards in terms of disclosures and terms. Most BNPL providers are nonbanks such as Klarna, Affirm and Afterpay.

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