Yesterday, the OCC issued new guidance for banks, addressing the risks of buy now pay later lending. The guidance focused on the popular “pay in 4” segment of BNPL. 

Not surprisingly, the national bank regulator recommended tight oversight of third-party servicers, the importance of transparent loan terms and fraud mitigation.

This guidance intends to minimize adverse outcomes for consumers by ensuring sound risk management is in place at every bank offering BNPL. The OCC also urged banks to report BNPL transactions to the credit bureaus in a timely manner.

As we said in an earlier newsletter this week BNPL is really popular with consumers and this holiday season will likely be the biggest ever for this payment method.

While fintech companies still take the lead in BNPL many banks have products in the market. Come January, if we see a wave of defaults at banks on their BNPL transactions, bank regulators will not be happy.

Featured

OCC issues guidance on managing risks of buy now/pay later

By Ebrima Santos Sanneh

The OCC advises banks to implement robust risk management strategies for BNPL lending, emphasizing transparent loan terms, fraud mitigation and compliance with consumer protection laws.

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