On December 6, 2023, the Office of the Comptroller of the
Currency (OCC) issued a bulletin that provides guidance to
banks on managing risks associated with certain "buy now, pay
later" (BNPL) loans. While the OCC notes that BNPL loans can
provide consumers with a "low-cost, short-term, small-dollar
financing alternative to manage cash flow," it warns that BNPL
lending can result in risks to consumers, as well as "credit,
compliance, operational, strategic, and reputation risks" to
banks, and that such risks should be mitigated.
The OCC bulletin specifically applies to loans that are
repayable in four or fewer installments with no finance charges
(i.e., no interest and no other finance charges). The OCC clarifies
that the guidance does not apply to "traditional"
installment loans, meaning loans repayable in more than four
installments, or loans that charge interest or have other finance
charges.
