Illinois has become one of the first states to establish a comprehensive regulatory framework for Buy Now, Pay Later (BNPL) lenders, with Gov. JB Pritzker signing legislation that brings the rapidly growing financing sector under state oversight.
The new Buy-Now-Pay-Later Loan Consumer Protection Act requires companies offering BNPL loans in Illinois to obtain a license from the Illinois Department of Financial and Professional Regulation and comply with new consumer protection standards. The law takes effect immediately, although lenders will have until Jan. 1, 2028 to come into compliance.
The legislation defineed BNPL loans as closed-end credit used to finance a specific purchase that is repaid in four or fewer installments or within 120 days. Traditional banks, credit unions, insurance companies and merchants offering financing through licensed BNPL providers are exempt from the law.
Among the most significant provisions, lenders must perform reasonable, risk-based underwriting before approving loans, assess a consumer's ability to repay, maintain written underwriting policies and clearly disclose the factors considered during the approval process. The law also prohibits lenders from using information about a borrower's social network or group-based credit scoring when evaluating creditworthiness.
The measure also gives state regulators broad authority to license, examine and discipline BNPL providers, including imposing civil penalties and conducting investigations of companies operating in Illinois.
Pritzker signed the legislation as part of a broader consumer protection package that also targets junk fees and ticket resale practices.
"Illinois is saying goodbye to junk fees once and for all, addressing abuses in the ticketing marketplace, and fighting for greater oversight and consumer protections," Pritzker said in a statement. "I'm proud to sign a slate of bills that cuts costs for working families while advancing transparency, fairness and accountability on behalf of Illinoisans."
State officials said regulation became necessary as BNPL products have expanded rapidly with little oversight.
"The lack of oversight on this industry has led to real consumer risk," Sen. Michael Hastings (D-Ill.) said. "We've seen loan stacking ... and consumers approved for loans when they clearly are not in a position to pay that loan back." Hastings said the new law requires providers to disclose loan terms, rates and fees while helping consumers make more informed financial decisions.
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