NYDFS Unveils Comprehensive BNPL Regulatory Framework

Following Gov. Kathy Hochul’s FY26 budget mandate, the NYDFS has released draft regulations to bring Buy Now, Pay Later providers under state supervision. The proposed rules introduce strict licensing, mandatory underwriting, and a late fee safe harbor to curb rising delinquency.

The New York State Department of Financial Services (NYDFS) has released a draft of new Buy-Now-Pay-Later (BNPL) regulations (PDF) to establish a comprehensive oversight framework for lenders operating in the state as consumers continue to use the payment option.

The new rules implement the BNPL law passed in the FY26 budget. This framework brings providers under state supervision and introduces key consumer safeguards, including dispute resolution standards, fee caps, and enhanced privacy protections, according to a news release from Gov. Kathy Hochul’s office.

“Buy Now, Pay Later loans are increasingly popular, but these products are not subject to uniform rules regarding the disclosure of loan terms, data privacy, credit reporting, and fees that other consumer loans must adhere to,” the release states. “In 2025, Gov. Hochul championed the law establishing stronger oversight in this rapidly growing financial sector. The law creates a comprehensive licensing and supervision framework for Buy Now, Pay Later providers.”

The regulations come as consumers increasingly manage multiple BNPL obligations simultaneously, according to a BNPL tracking survey from LendingTree.

Twenty-three percent of BNPL users admit to having three or more BNPL loans at the same time.

This “stacking” behavior raises concerns about hidden debt, as these short-term loans often do not appear on traditional credit reports, making it difficult for other lenders to see a borrower’s true debt load, according to the LendingTree report.

Thirty-three percent of users explicitly view BNPL as a bridge to their next paycheck, up from 27% two years ago.

The most striking trend is the sharp increase in missed payments.41% of BNPL users reported making at least one late payment in the past year, up from 34% the previous year.Over half (54%) of all BNPL users have paid late at some point in their history.

High-income earners (making $100k+), Gen Zers, and parents with young children are among the groups most likely to miss payments.

BNPL Supervision

“It is our responsibility to ensure that innovation is paired with strong consumer protections, so that New Yorkers can safely and securely use new financial products,” said NYDFS Acting Superintendent Kaitlin Asrow in the governor’s news release. “This regulation will govern how Buy Now, Pay Later companies operate in the state, protecting New Yorkers from excessive fees and the misuse of personal data, while ensuring transparent loan terms and a fair process for resolving disputes.”

The draft regulations include several mandates to bring BNPL products under formal supervision.

Licensing and Authorization: All nonexempt BNPL lenders will be required to obtain a license from the Superintendent of Financial Services to operate in New York. Lenders must also receive specific “category permission” to offer either interest-free or interest-bearing BNPL loans.Underwriting Mandates: Lenders will be required to perform reasonable risk-based underwriting before extending credit. This must include an assessment of a consumer’s income and indebtedness to ensure they can repay.Cost and Fee Limitations:
– Interest Rates: Interest-bearing BNPL loans cannot exceed the interest rates permitted under the New York General Obligations Law.
– Penalty Fees: Late fees are capped at an $8 safe harbor amount unless the lender can justify a higher cost-based fee to the DFS. Total cumulative penalty fees cannot exceed the original loan amount.
– Gratuitous Payments: Lenders are prohibited from soliciting “tips” unless they clearly disclose that such payments are voluntary and do not affect loan terms.Consumer Protections:Disclosures: Lenders must provide clear pre-transaction disclosures that include the amount financed, finance charges, APR (if applicable), and a payment schedule.Dispute Resolution: The draft regulation establishes formal procedures for handling billing errors, requiring lenders to acknowledge notices within 30 days and resolve them within 90 days.Refunds: BNPL lenders must credit a consumer’s account within three business days of receiving a refund statement from a merchant.Data Privacy: Lenders will be prohibited from using or selling “covered data” (personal and transaction information) for purposes other than making a specific loan — such as targeted advertising or cross-selling — without explicit, opt-in consumer consent. Tying loan approval to data-sharing consent is strictly forbidden.Compliance and OversightReporting: Licensees must file unaudited quarterly financial statements and annual audited financial statements with the DFS.Capital Requirements: Lenders will be required to maintain a corporate surety bond or deposit assets in an amount sufficient to cover outstanding obligations to consumers, such as refunds.Recordkeeping: All advertising and marketing materials must be maintained for at least seven years for DFS review.Public Comments and Effective Date

The proposed regulation is subject to a 10-day preproposal comment period beginning Feb. 23. A 60-day public comment period will begin upon publication of the proposed regulation in the New York State Register.

These regulations are slated to take effect 180 days after the official Notice of Adoption is published in the New York State Register. There will be an additional transitional period for those already offering BNPL loans in New York.

Visit the DFS website to review the proposed regulation or submit feedback.