Page 9 - June 20, 2024 Bulletin

aRTiCLeS

CFPB to Define Buy Now, Pay Quarterly Banking Profile:
Later Providers as Credit Card Banking Net Income $64.2 Billion
Providers in Q1 2024

The CPFB has issued an interpretive rule to define lenders who The banking industry reported net income of $64.2 billion in
provide buy now, pay later products as credit card providers the first quarter of 2024, an increase of $28.4 billion or 79.5%
under the Truth in Lending Act. As a result, BNPL lenders will from the previous quarter, according to the FDIC’s most recent
be required to provide consumers with options currently available Quarterly Banking Profile.
to credit card holders, such as the ability to dispute merchant A 13.3% decline in noninterest expense was the primary cause for
charges through the creditor.
the rise in net income, the FDIC said. That drop was driven by a
In a statement, CFPB said the BNPL industry has expanded decline in the expense related to the special assessment to recover
rapidly in recent years. (A Federal Reserve survey released Tuesday the loss to the Deposit Insurance Fund resulting from the agency’s
found that 14% of U.S. adults last year said they had used a decision to protect uninsured depositors following the Silicon
BNPL product in the past 12 months.) Like conventional credit Valley Bank and Signature Bank failures. Higher noninterest
cards, BNPL combines payment processing and credit services, income and lower provision expenses also contributed to the
while charging transaction fees to merchants, the bureau said. increase in net income.
“Because BNPL lenders will typically meet criteria under existing Quarterly net income for the 4,128 community banks insured by
law and regulation as traditional credit card providers, they need the FDIC was $6.3 billion in Q1, an increase of $363.2 million
to extend many of the same rights and protections as classic credit or 6.1% from the previous quarter, the agency said. Lower
card providers.”
realized losses on the sale of securities, and lower noninterest
As a result of the interpretive rule, BNPL lenders must investigate and provision expenses, offset lower noninterest and net interest
disputes that consumers initiate, refund returned products or income, it added.
canceled services, and provide billing statements, according to the Domestic deposits increased $190.7 billion or 1.1% in Q1,
CFPB. The bureau added that it is accepting public comments on marking a second consecutive quarterly increase. Estimated
the rule through Aug. 1.
insured deposits increased $114.9 billion or 1.1% while estimated
Read more: https://files.consumerfinance.gov/f/documents/cfpb_ uninsured domestic deposits increased $63.3 billion or 0.9%. The
bnpl-interpretive-rule_2024-05.pdf DIF balance increased $3.5 billion to $125.3 billion, primarily
driven by assessment revenue. The reserve ratio increased two
Illinois Passes Limits on Payment basis points to 1.17%.

Card Interchange Fees The total number of FDIC-insured institutions declined by 19
during the quarter to 4,568, the FDIC said. One bank opened,
Illinois lawmakers passed and the Governor has signed a state four banks did not file a Call Report and 16 institutions merged
budget that includes a ban on the collection of credit and debit with other banks.
card interchange fees for sales taxes, excise taxes and tips for
services. The ban, which is scheduled to take effect on July 1, Read more: https://www.fdic.gov/analysis/quarterly-banking-profile/
2025, would be the first of its kind in the nation. qbp/2024mar/

The ban was a late addition to a package of tax changes approved
by state lawmakers as part of a proposed $53.1 billion state
budget for fiscal year 2025. Illinois retailers currently receive a
1.75% discount on the sales taxes they collect. Gov. J.B. Pritzker
proposed capping that discount at $1,000 a month – a plan that
received considerable pushback from state retailers. The ban on
interchange fees is likely meant to offset the losses retailers will
incur once the new cap goes into effect.

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