New York is moving to establish a dedicated licensing and consumer-protection regime for Buy Now, Pay Later (BNPL) products. The New York legislature enacted the Buy Now Pay Later Act (Article 14-B of the New York Banking Law) in 2025, and the New York Department of Financial Services (NYDFS) has now published a proposed rule implementing that Act. The proposal is currently in a pre-proposal outreach phase.
NYDFS's proposal is notable not only because it would require most BNPL lenders to obtain a New York license, but also because it would impose a detailed conduct regime resembling a hybrid of closed-end Truth-in-Lending disclosures, credit-card-style billing error and unauthorized-use protections, and significant limits on fees, payment practices, and data use. In other words, it is a full consumer-credit playbook, not a light-touch fintech registration.
NYDFS has solicited pre-proposal outreach comments (due March 5, 2026) and indicates that there will be a 60-day comment period after the proposal is published in the State Register. The proposed regulation would generally take effect 180 days after adoption.
Scope of the Proposal: More Than "Pay-in-Four"
The proposed rule would apply to "BNPL loans," which is defined as closed-end credit offered to a consumer in connection with a particular purchase of goods and/or services (excluding motor vehicles), with limited seller-credit and business-purpose exceptions. The breadth is remarkable: the definition is not limited to "pay-in-four" financing, typically thought of as BNPL. Rather, the proposed rule's requirements would apply across this broader universe of covered BNPL credit, including longer-duration or interest-bearing point-of-sale installment products that may not be marketed as "BNPL" at all.
NYDFS proposes defining "BNPL lender" to include (i) a person who makes BNPL loans and (ii) a person to whom ownership is transferred; it also captures certain platform operators where a substantial purpose of the consumer interaction is to obtain BNPL loans from third parties. The Act generally requires a person acting as a BNPL lender to obtain a NYDFS license, subject to certain exemptions (including for specified "exempt organizations," which are certain federally chartered depository institutions and OCC-licensed foreign banking corporations). Existing BNPL lenders must apply for a license within 45 days after the regulation's effective date to keep operating provisionally. And there is a real consequence for getting this wrong. The Act provides that a BNPL loan made without the required license/permission may be void (and uncollectible).
Disclosures and Periodic Statements
NYDFS proposes a multi-layer disclosure framework that would combine elements of the Regulation Z disclosure requirements for both closed-end loans and credit cards.
Before consummation, lenders would have to provide transaction disclosures that could go well beyond what some BNPL providers are currently presenting. Disclosures would need to cover, among other items, payment schedule, fees/penalties, consequences of missed payments, dispute/refund and unauthorized-use rights, and (where applicable) finance charge and APR disclosures. The disclosures, as proposed, would look like the Regulation Z disclosures for closed-end loans. NYDFS also appears to want these disclosures to be hard to miss at checkout (not buried in links or fine print).
Afterward, within one business day after consummation, providers would need to provide a confirmation, including transaction identification and key account information. Also, the proposal requires periodic statements for each billing cycle (no longer than monthly) when there is a balance greater than $0 or a finance charge, similar to periodic statements for credit cards. The periodic statements must be mailed or delivered to consumers within certain time frames intended to ensure that consumers receive them before payment due dates, such as 14 days (for 30-day cycles) and 7 days (for shorter cycles). This may require some providers to think through statement delivery methods and timing controls.
The proposal includes material language access obligations, including Spanish translations and additional language obligations tied to marketing and consumer communications used in New York. In short, if you market in a language used in New York, be prepared to provide disclosures in that language too.
Billing Errors, Refunds, and Unauthorized Use
The proposal contains detailed billing error procedures that look closer to credit card error-resolution frameworks than typical installment loan servicing. Among other things, the proposal sets timelines for acknowledging and investigating disputes—consumer notice within 60 days, lender acknowledgment within 30 days, and resolution within two billing cycles (max 90 days)—and generally prohibits collecting the disputed amount (or treating it as delinquent) and restricts certain adverse reporting of disputed amounts pending resolution.
The proposed rule also addresses refund handling, including timelines for crediting the consumer once the lender receives a credit statement from the merchant/seller, and sets a structure for unauthorized use liability that incorporates a $50 cap under specified conditions. NYDFS expects the retail seller to transmit a credit statement within 7 business days after agreeing to refund, and the BNPL lender must credit within 3 business days after receipt. That is a merchant-operations issue as much as a lender compliance issue, and it may require updates to merchant agreements and refund workflows.
Similar to the transaction disclosures, NYDFS proposes requiring BNPL lenders to accept and respond to billing error notices/unauthorized use/forbearance requests (including, it appears, through live customer assistance channels) in English, Spanish, and any language principally used in New York advertising.
Underwriting Requirements
The Act requires "reasonable risk-based underwriting," policies, and procedures, and limits the use of a consumer's "social network" creditworthiness in underwriting. The proposed rule adds prescriptive detail: lenders must consider, at a minimum, income and indebtedness, maintain written underwriting policies, and disclose the factors considered in underwriting to consumers in a clear and conspicuous manner. The underwriting "factors considered" disclosure may be one of the proposal's most operationally sensitive requirements. If lenders are required to make an underwriting disclosure, providers may need to balance (i) meaningful consumer transparency and (ii) the practical reality of model complexity, multiple underwriting pathways, and the competitive sensitivity of underwriting inputs.
Restrictions on Penalty Fees, Payment Practices, and Tips
The proposal places express limits on interest and fees. For interest-bearing BNPL loans, NYDFS ties the interest rate cap to New York's general usury framework (General Obligations Law § 5-501) and treats a broad set of "fees" as interest, depending on how they function. Pricing models that rely on "fees" rather than stated interest should be reviewed carefully. In addition, the proposal would limit penalty fees, which are described as fees charged for violating the terms or other requirements of a BNPL loan agreement. Penalty fees would be limited to a reasonable proportion of costs to the lender due to the violation and are subject to NYDFS approval. No penalty fee may be imposed if there is no dollar amount associated with the violation in the BNPL loan agreement, and no penalty fee may be imposed more than once for each single event or transaction. The proposal also includes an $8 safe harbor. Aggregate penalty fees are capped at the original amount financed. The proposed rule would also restrict "convenience fees" for payment methods.
NYDFS proposes limiting lenders to two attempts using the same payment method for any single due amount unless the consumer provides new, specific authorization for additional attempts. The proposal also restricts the solicitation of tips/gratuities, including requiring clear "voluntary" disclosures. Lenders would be prohibited from setting a default tip amount to anything greater than zero and may not solicit a tip more than once per transaction.
Data Privacy
The Act generally limits using, sharing, or selling consumer data beyond what is necessary to make the BNPL loan, absent a consumer disclosure and affirmative consent. The proposed rule would go further by defining "covered data"; restricting use beyond what is "reasonably necessary"; requiring affirmative consent that is use-case specific and not bundled; and imposing annual renewal and withdrawal/deletion mechanics (including certain downstream deletion obligations). NYDFS even gets into consent-screen design (e.g., no bundling and meaningful "decline" options). The proposal's "reasonably necessary" concept expressly excludes targeted advertising, individualized pricing, and cross-selling of non-requested products, as well as the sale of covered data—effectively forcing opt-in consent for many common fintech monetization and marketing practices.
Takeaways
If NYDFS adopts the proposal largely as drafted, BNPL providers should expect New York to treat BNPL more like mainstream consumer credit than a novel fintech product. In practice, that means (i) licensing, (ii) expanded pre-transaction and periodic disclosures, (iii) formalized billing-error and unauthorized-use processes with defined timelines, and (iv) meaningful operational constraints on penalty fees, payment retries, and "covered data" use. For providers already operating in New York, the near-term work is a practical gap assessment and an application plan—and a decision about whether to comment—because the proposal's transition period is measured in weeks, not months.
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