In a letter to Acting Director Himamauli Das, AFC Requests updated guidance to create equity and alignment of data collection for CIP Rule ‍

Diverse Interpretation of CIP Rule Could Create Confusion for Consumers Dear Members of the New Mexico Legislature,

WASHINGTON, D.C. (April 19, 2023) – The American Fintech Council (AFC), the leading industry association representing responsible fintech companies creating critical access to safe and affordable financial services has requested the Financial Crimes Enforcement Network (FinCEN) to consider issuing regulatory guidance to better align data collection components of the Customer Identification Rule (CIP Rule) to the evolution of the modern digital banking environment, specifically related to Buy Now Pay Later (BNPL) loans. Alternatively, AFC has also requested that FinCEN extend the CIP credit card exemption to all similarly situated online or point of sale credit products, including BNPL  loans.

“Our members utilize safe and responsible innovation to build the future of financial services and create access to credit,” said Phil Goldfeder, Chief Executive Officer at the American Fintech Council. “We appreciate the opportunity to collaborate with FinCEN to provide much needed clarity and safety for fintech companies and their consumers.”

In a recent letter to FinCEN Acting Director Himamauli Das, AFC wrote seeking regulatory clarity with the CIP Rule specifically to determine the sufficiency of collecting  the last four digits of a Tax ID Number (TIN) directly from the consumer, while collecting full TINs from a third party, and verifying the provided numbers through the bank’s risk-based identity verification procedures. The current confusion surrounding the  CIP Rule has led to inconsistent regulatory decisions and differing practices in the marketplace.

“FinCEN recognized the rapid speed of technological change and implemented an exemption to full TIN collection within the CIP Rule specific to credit card issuers.”  Wrote Yana Miles, General Counsel and SVP, Head of Regulatory Affairs at the American Fintech Council. “The credit card exemption allows credit card issuers to obtain a customer’s TIN information from a third-party source instead of directly from the  customer… (which) allows credit card issuers to streamline application processes and grant access to credit more efficiently.”

A recent report by the Consumer Financial Protection Bureau (CFPB) on BNPL loan products specifically highlights comparisons to credit cards in the consumer experience  and services that new products like BNPL provide. The report cites BNPL as a rapidly expanding alternative to credit, serves consumers similarly, and provides a less expensive alternative than revolving credit.

“With the similarities to credit cards in consumer experience and services that new products like BNPL provide, AFC encourages FinCEN to apply consistent interpretations  to applicable rules and regulations,” continued Miles in the letter. “Specifically, AFC requests that FinCEN hold BNPL financing in similar a regard to credit cards and qualify them within the credit card exemption of the rule.”

Read full letter here.