Point-of-Sale Finance Series: Litigation Trends — FCRA, TILA, and the Checkout Script as Your First Line of Defense

Jason Cover (0:05)

Welcome to a special edition of our continuing point of sale finance series. I'm Jason Cover, and today I'm joined by Erin Edwards and Simon Fleischmann. Before we jump into today's episode, let me remind you to visit and subscribe to our blog, troutmanfinancialservices.com. And don't forget to check out our other podcasts on troutman.com/podcast.

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Simon and Erin, thanks so much for joining us today. We're going to take a little bit of a different spin than what we've done in the past. I think a lot of our podcast limited series on point of sale finance is really focused maybe on the regulatory side of point of sale finance or even the enforcement side. But what we haven't necessarily focused is how this is driving litigation trends. So with that said, Simon, could you maybe explain how that concept of financing after the quote unquote checkout can create litigation risk in this context?

Simon Fleischmann (1:04)

Yeah, sure. First, Jason, thanks for having us on today. It's great to be a part of this limited series that you're doing. Interesting stuff and happy to be a part of it. Today, we're going to talk about deceptively simple moment, which is just checkout. That point of sale moment now involves a no interest, paying for buy now pay later product or it could involve a longer term embedded financing, a retail installment product or a private label retail card application.

The litigation risk often turns less on the product label and more on what the consumer saw, what the consumer was told, whether a credit report was pulled, what disclosures were provided, and what happened later when the consumer disputed a charge, returned merchandise, missed an autopot pay, or saw something reported to a credit bureau.

The federal regulatory picture has also moved quickly, and I discussed this in prior episodes, but the CFPB issued a 2024 BNPL interpretive rule, treating certain digital user account, BNPL lenders as card issuers for Reg Z purposes. And then it withdrew that interpretive rule in May of 2025 And I bring that up just because the withdrawal of that rule does not make the risk disappear, because there are still FCRA claims, TILA theories, state UDAP laws, there's retail installment laws, private litigation, state regulatory activity, and merchant lender contract disputes that remain very much in play. So our goal for this episode is to try to be practical with your listeners. We want to help lenders, merchants, platforms, and practitioners spot where point of sale litigation trends are going and just where those issues start and identify the controls that can keep a small checkout dispute from becoming a regulatory issue, a credit reporting case, or a class action. And so a useful starting point is to broaden the lens from BNPL to the larger point of sale credit ecosystem.

Jason Cover (3:25)

Simon, those are great points. And I think one of the things we really stress and continue to stress with clients that we've seen is, is that kind of application process at point of sale and what the consumer understands? You've seen this in like rent to own where one of the common refrains is that folks didn't realize it was a rent to own transaction. They thought it was a purchase or it was credit. I've personally seen our BNPL clients do a great job of explaining how that Pay in 4 transaction works on screen. I'm always really impressed how this is probably not lawyers doing it, or at least it's not me doing it, but really simplifying the legalese and how that transaction works into something very simple that folks can understand on screen.

Simon Fleischmann (4:03)

Yeah, that's so helpful. I'm glad to hear that that's what our clients are doing because that could really make all the difference in the world in our litigation matter.

Jason Cover (4:11)

You know, Simon, you kind of tailed off there with BNPL expanding into everything almost. Erin, I think we have talked a lot about that definition of what is or what isn't a BNPL loan and how that's shifted over the last two years.

Could you maybe provide some impact on setting aside the regulatory aspect and what the CFPB does or doesn't believe BNPL is, how that is driving the litigation perspective?

Erin Edwards (4:34)

Really, we're talking about paying for of loans, longer-term embedded installment loans, retail installment sales contracts, private label retail credit cards. These can all appear to a consumer as a quick checkout option, but they can trigger different disclosures, underwriting, credit reporting, refund, dispute resolution issues. Really, the first legal question is not what marketing calls the product, but how the product actually works.