Key takeaway: Merchants relying on BNPL at checkout in New York, and BNPL providers building compliance programs around the rule, should watch the underwriting provision closely. It’s the specific point where industry and regulators remain furthest apart. Plus, it will directly affect how easily consumers can be approved for BNPL credit at the point of sale if the rule is finalized in its current form.
The American Fintech Council (AFC) and the Financial Technology Association (FTA) have filed comment letters opposing New York’s draft buy now, pay later (BNPL) regulations. AFC warns that a per-transaction income-and-indebtedness underwriting check could cut available BNPL credit in the state by more than $500 million a year.
The formal public comment period on the New York Department of Financial Services’ (DFS) proposed BNPL rule closed on September 14. The rule implements the state’s BNPL Act, passed as part of the FY26 budget.
It would create the first comprehensive state-level licensing and supervision regime for BNPL lenders in the country. It is expected to cover disclosures, fees, dispute resolution, data privacy, and underwriting. Both trade groups have opposed the underlying legislation since it was signed into law. They’ve submitted multiple rounds of comments as DFS moved from an informal pre-proposal draft to the formally proposed rule.
At issue in this latest round is the rule’s underwriting mandate. It requires BNPL lenders to perform “reasonable, risk-based underwriting” that assesses, at a minimum, a consumer’s income and indebtedness before each loan.
AFC and FTA argue that the requirement doesn’t reflect how popular pay-in-four BNPL products actually work. Each loan is individually underwritten. There are typically no revolving balances or hidden fees. Missed payments generally aren’t reported to credit bureaus, unlike with traditional credit cards. The groups have previously said that treating BNPL like a credit-card product risks reducing access to what they describe as a lower-cost, more transparent form of consumer credit.
Why it matters: New York’s rule is widely seen as a template other states may follow now that federal oversight of BNPL has receded. How the state resolves this underwriting fight will likely shape both merchant risk exposure and BNPL product design well beyond New York. A stricter, transaction-level underwriting standard could mean more friction and declined transactions at checkout for merchants offering BNPL. A narrower standard could leave the consumer protections DFS is trying to build with more gaps than intended.
Sources: Payments Dive; Steptoe; Fox Rothschild
