CFPB advisory board hears industry push to rescind 2017 payday rule as advocates warn BNPL and wage advances can harm low-income households

The Consumer Financial Protection Bureau's Consumer Advisory Board heard sharply contrasting views on small-dollar products, with industry representatives urging the bureau to revisit its 2017 Small Dollar Loan Rule and consumer advocates pressing for stronger protections for low-income households.

Deputy Director Jeff Breeder opened the session by framing the policy stakes: many Americans lack liquid savings to cover unexpected expenses, and newer products such as buy-now-pay-later (BNPL) and earned-wage access (EWA) have grown rapidly as alternatives to traditional short-term credit. "We will discuss products as diverse as conventional payday and traditional installment loans ... but also those offered by financial technology firms," he said.

Trade associations argued the 2017 rule's payment-collection restrictions and notice templates have introduced friction that reduces repayment flexibility and access to regulated credit. "The rule creates friction between the lender and the borrower, and it's enough friction that it's impacting those outcomes," said Andrew Duke, chief executive of the Online Lenders Alliance, who summarized survey responses from member lenders about higher delinquency and charge-off rates after operational changes.

Penny Lee of the Financial Technology Association defended BNPL and EWA as widely used, low-fee tools for many consumers. "Buy Now Pay Later is an alternative payment option that helps consumers manage cash flow and avoid high interest rates and hidden fees," she said, adding that the typical BNPL loan is small and that EWA is "nonrecourse, no legal obligation to repay, no late fees, no interest, and no credit score impact."

Consumer advocates disputed those characterizations. Chelsea of Hawaiian Community Assets described local experience in Hawaii where nearly half of households live paycheck to paycheck and said BNPL and some EWA usage can trigger repeat borrowing, rollovers and overdraft chains. "If a market's profit model depends on borrowers repeatedly failing to repay, this is not a consumer choice. This is a market failure," she said.

Advocates pointed to research and data the bureau has published: speakers noted bureau findings on effective APRs for some EWA models and BNPL delinquency patterns, and they urged consistent ability-to-repay standards and stronger disclosures across small-dollar products. "We should require transparent comparable ability-to-repay standards across all small dollar products, including buy now pay later and wage advance services," Chelsea said.

Panelists also raised operational details that drive disagreement. Industry speakers said the rule's required "unusual payment" notice wording and blackout timing cause customer confusion and extra verification steps; CFPB staff and advocates asked for updated, independent outcomes data before finalizing new regulatory steps.

The bureau's senior program manager for small-dollar products, Laura Utis, said the agency had posted a report on BNPL to its website the same day and that a complaint database report was nearing final clearance. She said the bureau would take the CAB's views back to staff for further consideration.

The meeting produced no formal decisions or votes. The conversation underscored the central policy choice facing the CFPB: whether to preserve regulatory flexibility that supporters say protects access, or to impose tighter guardrails that advocates say are necessary to prevent repeat borrowing and fees that can compound harm for financially fragile households.