Dive Brief:

  • Affirm CEO Max Levchin on Wednesday acknowledged oversight from the Consumer Financial Protection Bureau, asserting that supervision by the federal agency levels the playing field in the buy now, pay later industry.
  • “Being subject to supervision from the CFPB, from our point of view, is a formalization of the relationship between Affirm and the bureau,” Levchin said Wednesday during the company’s fiscal first-quarter earnings call with analysts.
  • The company’s quarterly filing for the period ending Sept. 30 notes the company is “subject to supervision by the CFPB, which enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws.” That’s a change from the company’s prior quarterly filing, when Affirm said it expected to begin being supervised in the “immediate future.”

Dive Insight:

An Affirm spokesperson declined to comment on when CFPB supervision began. 

“This is another important step toward driving adoption of more flexible and transparent payment options, like Affirm,” the spokesperson said Thursday. “We look forward to working with the Bureau to promote consistent industry standards and fair competition.” 

A spokesperson for the CFPB declined to comment Thursday. On Tuesday, the bureau proposed a rule that would subject Apple, Google and 15 other large, non-bank technology companies that provide digital wallets or payment apps to increased regulation. 

An analyst noted Wednesday during the company’s earnings call that the CFPB has been active with respect to BNPL and fintech, and asked for Levchin’s latest thoughts on the bureau’s role and how he sees that evolving.

“We may be somewhat unique in this, but we think it’s a positive step for the industry, most importantly,” Levchin said of being subject to CFPB supervision. It “normalizes the engagement with the regulatory bodies. It’s also good for consumers, for obvious reasons, and good for us, because we think it levels the playing field in quite a number of senses.” 

Affirm has been in contact with the CFPB for “a long, long time and certainly expect to continue being engaged with them,” Levchin said.

In the most recent quarterly filing, Affirm noted CFPB examinations “could result in matters requiring attention, investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.”

For its part, digital payments company Block, which owns Australian BNPL firm Afterpay, noted in its third-quarter filing that the CFPB “recently announced plans to regulate companies offering BNPL products.” 

The CFPB’s action in the space has been anticipated at least since the bureau released its BNPL report in September 2022. At the time, the bureau said it was considering rules or “interpretative guidance” to ensure BNPL providers adhere to laws that apply to credit card companies. The bureau also said it planned to institute supervisory examinations of BNPL players.

The CFPB’s proposal announced this week would define larger participants in the market for general-use digital consumer payment applications, applying to companies that handle five million or more digital payment transactions every year, the spokesperson said.

As for how the rule might apply to BNPL companies, the CFPB spokesperson noted that “if a nonbank is extending credit through its own digital app, that transaction would not count as market activity for purposes of determining whether that nonbank is a larger participant. However, when consumers use a BNPL provider’s payment credentials stored in third-party digital wallets, the third-party digital wallet providers would be participating in the market with respect to those transactions just as they would with respect to bank-issued credit cards stored in the wallet.”

A House subcommittee drafted a bill last month that would require the CFPB and U.S. Government Accountability Office to conduct studies on BNPL use before the bureau could issue any new BNPL-related rules.

For the fiscal first quarter, Affirm reported revenue jumped 37%, to $496.5 million, compared to the year-earlier quarter, according to its quarterly filing. The company’s loss narrowed, to $171.8 million.



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