Buy Now Pay Later advertising

New rules are making things unclear for online advertisers. Even though the CFPB has less power, Regulation Z still controls how credit ads, including “buy now, pay later” (BNPL) ads, work in the US. Here’s what you need to know.

What is Regulation Z?

Regulation Z is a set of rules issued by the CFPB that implements the Truth in Lending Act (TILA). It helps people understand credit by making companies tell them the costs and terms clearly. This includes rules for credit ads like BNPL.

How Does Regulation Z Apply to BNPL Advertising?

How does Regulation Z affect BNPL ads? Even though BNPL is different from regular credit, the CFPB says Regulation Z still applies. This is especially true for “Pay-in-Four” BNPL, which the CFPB sees as like a credit card.

Key Requirements for BNPL Ads under Regulation Z:

• Clear and Conspicuous Disclosure: Advertisements must clearly and conspicuously disclose key terms, such as the number of installments, the amount of each payment, and any fees or charges.
• No Misleading Claims: Ads cannot make false or misleading statements about the BNPL product.
• Triggering Terms: If an ad mentions certain “triggering terms” (like the amount of a payment or the absence of interest), it must also disclose additional information, such as the APR and any other charges.
• Fairness and Deception: Ads must be fair and not deceptive. This means avoiding practices that could mislead consumers about the true cost or terms of the BNPL loan.

Digital advertising and the “one click away” guidance.

When these regulations were written they were largely meant to govern print advertisements. In most digital ad formats like search, banners, and CTV it’s not practical to show the full terms of a loan or the example of total payments with clearly stated APR. 

Informally, the regulators adopted a “one click away” policy. Meaning, the full example of financing costs including total payment and APR should be within one click away of the ad. This is interpreted that to mean on the landing page very easily accessed from the same area as the product price. 

The Role of a diminished CFPB

The CFPB continues to be responsible for enforcing Regulation Z. Even with a weakened agency, these regulations are still in place and theoretically enforceable. However, the current situation may lead to:

• Reduced Enforcement: With limited resources and a shift in priorities, the CFPB may be less likely to actively investigate and prosecute violations of Regulation Z in the BNPL space. Expect to see advertisers pushing the envelope into areas that would have resulted in penalties.
• Selective Enforcement: Some enforcement actions may be politically motivated or may be resolved through political means. Big players may be able to do things that smaller players cant. Consumers will be hurt.

What should ecommerce advertisers do?

Waterbucket will continue to follow Regulation Z one click away guidelines and strongly recommends that other advertisers continue to follow the regulations. Not only is this a good business practice to protect against potential enforcement actions, it’s good for the consumer. 

This is not legal advice. If you are unsure your BNPL ads, talk to a lawyer who knows advertising law.