New York City Urges NYDFS to Expand BNPL Rules to Medical and Rent Financing

Legislative Snapshot

• Law: New York Buy-Now-Pay-Later Act, Banking Law Article 14-B
• Jurisdiction: New York
• Status: NYDFS has proposed implementing regulations under 3 NYCRR Part 423. New York City DCWP submitted comments recommending changes to the proposed rules.
• Key Provisions: Licensing and supervision of BNPL lenders, consumer disclosures, advertising requirements, refunds and credits, billing-error resolution, recordkeeping and other consumer protections. DCWP is recommending that NYDFS explicitly include medical and rent financing products within the regulatory framework and strengthen several servicing requirements.
• Effective Date: The proposed regulations provide for a 180-day implementation period following publication of the final rules. DCWP is recommending that NYDFS shorten that period to 60 or 90 days.
• Industry Impact: The final regulations could affect BNPL lenders and companies servicing BNPL receivables, particularly requirements involving consumer disputes, refunds, disclosures, record retention, and automated customer service

New York City regulators are urging the New York State Department of Financial Services to expand its proposed buy now, pay later regulations to explicitly cover financing products used for medical care and housing payments, while also strengthening disclosure, dispute resolution and recordkeeping requirements.

The New York City Department of Consumer and Worker Protection submitted a Sept. 21 comment letter supporting much of NYDFS’ proposed 3 NYCRR Part 423 but recommending several changes to the regulatory framework. The proposal would implement New York’s Buy-Now-Pay-Later Act through licensing, disclosure, and consumer protection requirements for BNPL lenders.

The city’s recommendations could have implications beyond BNPL originators. Several proposals address servicing functions familiar to the accounts receivable management industry, including billing disputes, refunds, consumer communications, record retention and the use of automated customer service systems.

City Seeks Coverage of Medical and Rent Financing

A central issue raised by DCWP is whether specialized “Care Now Pay Later,” or CNPL, and “Rent Now Pay Later,” or RNPL, products clearly fall within the state’s BNPL framework.

Under the proposed rule, a BNPL loan generally is defined as closed-end credit provided in connection with a consumer’s particular purchase of goods or services. DCWP asked NYDFS to explicitly state that financing marketed for health care, rent and mortgage payments is covered.

The department said some medical financing products are structured as open-end revolving credit or may finance a series of treatments rather than one specific purchase, creating potential uncertainty about whether they fall within the regulatory definition.

DCWP also raised concerns about the proposal’s exclusion for “isolated, incidental or occasional transactions,” arguing that NYDFS should clarify the provision so it does not create a potential avenue for medical or rent financing providers to avoid coverage.

The city cited data from its Financial Empowerment Centers in arguing for broader protections. Among clients using BNPL, 75% had annual incomes below $57,000, 30% were unemployed and median debt balances were approximately $11,690, compared with $8,519 among clients carrying debt who had not used BNPL.

DCWP Recommends Changes to Disclosures and Servicing

Beyond clarifying which products are covered, DCWP asked NYDFS to strengthen several provisions affecting how BNPL accounts are marketed and serviced.

The department recommended requiring advertisements and point-of-sale offers to disclose material conditions, including deferred interest and late-payment penalties. It also wants lenders to retain information showing how long advertisements ran and where they appeared, with records available to other government agencies with jurisdiction.

For post-transaction communications, DCWP recommended requiring disclosures by email and providing hard copies when consumers enroll in person.

The department also proposed requiring BNPL lenders’ agreements with merchants to obligate those merchants to respond to refund inquiries. DCWP said lenders should maintain records demonstrating their “reasonable efforts” to obtain a merchant’s agreement to issue a refund.

City Targets Billing Disputes and Automated Customer Service

The city’s recommendations extend directly into dispute handling.

DCWP wants lenders to accept billing-error notices through email and webforms in addition to telephone and mail channels. It also urged NYDFS to prohibit BNPL providers from relying solely on AI or automated customer assistance to resolve billing disputes or refund requests.

The department recommended requiring BNPL lenders to record and retain complaint calls for at least three years so regulators can review oral billing-error notices.

For receivables and servicing companies, those recommendations could be particularly significant if incorporated into the final regulations. They would place additional emphasis on maintaining accessible dispute channels, documenting consumer interactions and ensuring human assistance remains available for certain account issues.

DCWP Seeks Faster Implementation and Broader Enforcement

NYDFS’ proposal provides for the regulations to take effect 180 days after publication of a notice of adoption. DCWP recommended reducing that period to 60 or 90 days, citing what it described as the risk of “severe financial harm” to consumers.

The city also urged NYDFS to use its authority under Section 1042 of the Consumer Financial Protection Act to address unfair, deceptive, and abusive conduct by BNPL providers.

DCWP separately called on New York state lawmakers to give the city parallel authority to enforce the BNPL regulations and Article 14-B of the New York Banking Law. The department argued that joint state and city enforcement could provide more consistent oversight of BNPL products across New York.

The recommendations remain comments on a proposed regulation and do not themselves change the obligations of BNPL lenders. For receivables and servicing companies involved with BNPL accounts, however, the letter identifies areas that could receive additional regulatory attention as New York finalizes its framework, particularly dispute resolution, refund processing, documentation and automated consumer communications.