Illinois Enacts Comprehensive Regulation of Buy-Now-Pay Later Products

With Governor J.B. Pritzker’s signature to on June 25, 2026, Illinois has enacted the Buy-Now-Pay-Later Loan Consumer Protection Act, becoming one of the first states to establish a comprehensive regulatory framework for buy-now-pay-later (“BNPL”) products.  This action reflects a broader trend of states taking a more active role in regulating emerging consumer financial products alongside the Consumer Financial Protection Bureau’s evolving regulatory priorities.

The Act generally applies to closed-end consumer credit extended in connection with the purchase of goods or services that: (1) is payable in four or fewer installments or (2) has a term of 120 days or less. 

The new law will require many BNPL providers operating in Illinois to obtain a state license and comply with extensive underwriting, disclosure, servicing and consumer protection requirements. Although compliance is not required until January 1, 2028, at the earliest (the Illinois Department of Financial and Professional Regulation may, by rule, extend the effective date), affected companies should begin evaluating the law’s impact now.

Among other things, the Act:

• Creates a new licensing regime for BNPL providers
• Requires lenders to conduct ability-to-repay and other risk-based underwriting before extending credit
• Imposes consumer disclosure requirements and mandates complaint and dispute-resolution procedures
• Restricts certain payment practices, including repeated debit attempts and certain consumer fees
• Subjects covered loans to Illinois’ 36% interest rate cap
• Grants broad examination and enforcement authority to the Illinois Department of Financial and Professional Regulation
• Provides that violations may also constitute violations of the Illinois Consumer Fraud and Deceptive Business Practices Act

The Act applies broadly and includes anti-evasion provisions designed to reach a wide range of BNPL structures, including certain bank partnership and platform arrangements. While banks and certain other entities are exempt from licensing, they and many other participants in the BNPL ecosystem may nonetheless be subject to the law’s substantive requirements.

What should companies do now?

Companies offering BNPL products to Illinois consumers should assess whether their products and business models fall within the Act’s scope, evaluate potential licensing obligations, review underwriting and servicing practices, monitor agency rulemaking and begin planning for implementation before the January 1, 2028 compliance date.

The Manatt Consumer Financial Services team is monitoring implementation of the Act and forthcoming regulations. We are available to assist companies in evaluating the law’s applicability and developing compliance strategies. If you have questions, please contact any of the authors or the Manatt professional with whom you work.