Fed Finalizes BNPL Disclosure Requirements: Late Fees Capped, Credit Reporting Mandated

The Federal Reserve Board finalized regulations Friday that formally classify buy-now-pay-later products as extensions of credit subject to Truth-in-Lending Act disclosure requirements. The rule, effective January 1, 2027, caps BNPL late fees at $8, requires standardized APR-equivalent disclosures, and mandates reporting to all three major credit bureaus.

The rule applies to any product that splits a purchase into four or more installments, regardless of whether the provider charges interest. This captures Klarna Pay in 4, Affirm Pay in 4, Afterpay, and PayPal Pay Later — products that have collectively facilitated over $400 billion in U.S. purchases since 2020.

BNPL providers must now disclose the total cost of credit (including late fees), provide dispute resolution rights equivalent to credit card protections, and report payment history — positive and negative — to Equifax, Experian, and TransUnion.

"Consumers using BNPL deserve the same protections as consumers using credit cards," said Fed Governor Michelle Bowman. "These products are credit. They should be regulated as credit. The era of regulatory arbitrage for BNPL is over."

Klarna and Affirm issued statements expressing conditional support, noting that credit reporting benefits responsible borrowers by building credit history. Afterpay was more critical, arguing that the $8 late fee cap "eliminates the primary mechanism that encourages on-time repayment."