In the Media
How Payment Firms Are Responding to CFPB Pressure
Read Time: 1 minMember Aaron Kouhoupt (Cleveland) was interviewed by American Banker on September 10, 2024, in “How Payment Firms Are Responding to CFPB Pressure.” Aaron discusses the Consumer Financial Protection Bureau’s approach to buy now/pay later.
In the new proposed interpretive rule, the CFPB “takes the position that they are clarifying prior statements and that their prior guidance on the subject was limited to a very specific fact pattern and only that fact pattern,” said Aaron Kouhoupt, Chief Privacy Officer at New Orleans-based consumer finance law firm McGlinchey, in an interview.
“This isn’t really rulemaking. What the CFPB is saying is, ‘This is us exercising our power to interpret existing law. We’re not writing new law, we’re not creating a new rule,'” Kouhoupt said, noting that the CFPB approached its oversight of the buy now/pay later industry in a similar way.
“The slight difference is that in buy now/pay later, they said, ‘This is an interpretive rule’ and they gave a sort of compliance window for when the interpretive rule would become effective.”
It’s “highly likely” that the proposed interpretive rule gets finalized, Kouhoupt said. “The CFPB obviously has a very strong opinion on this subject, so I would be surprised if it doesn’t get finalized.”
The reinterpretation hinges on the fact that TILA and Regulation Z have a very broad definition of credit that refers to a term, “debt,” which itself is undefined, Kouhoupt said. “What the question in an earned wage product has been, really from the onset, is do you have credit, i.e., is there a debt that is created when you take out these early wage access products?”