For Immediate Release:
May 22, 2026
Contact:
Robert Mayo | hello@woodstockinst.org
Proposed BNPL Legislation Weakens Consumer Protections in Illinois
CHICAGO – SB 3561, the Buy-Now-Pay-Later (BNPL) Loan Consumer Protection Act, would weaken oversight of BNPL lenders by excluding them from critical data reporting requirements and codifying a loophole to evade consumer protection measures.
BNPL is a $70 billion dollar industry that is rapidly growing at 20% a year, whose products are disproportionately used by women, Black, and Latino consumers. Advocates urge the Illinois House to engage more stakeholders before moving forward with this sweeping regulatory change.
The bill would take BNPL lenders out of the Consumer Installment Loan Act (CILA) and its existing loan database, the same tool that exposed predatory lending targeting Black neighborhoods in Chicago. The database remains the only mechanism available to detect lending patterns that disproportionately impact Black, Brown, and lower-income communities.
“Advocates and regulators alike depend on data to identify predatory lending that drains wealth from historically marginalized communities. At a time when the federal government is abandoning consumer financial protection and fair lending enforcement, it is alarming that the Illinois General Assembly is fast tracking a bill that would remove one of the fastest growing consumer loan products from accountability and oversight,” said Horacio Mendez, President & CEO of Woodstock Institute.
SB 3561 also resurrects a “120-day loophole” that payday lenders have exploited as far back as 2005. By strictly defining BNPL products as a loan that must be repayable in 120 days or less, this bill makes it easy for lenders to design their products to evade legal oversight by, for example, originating loans that are repayable in 121 days. Klarna, a leading BNPL provider, already has BNPL loans ranging from 3 to 24 months that would slip right through this bill’s definition of BNPL loans.
Additionally, although the law requires important consumer protections, such as refund and dispute resolution, to be “fair, transparent, and not unduly burdensome to the consumer,” the legislation leaves these terms undefined and punts rulemaking to state regulators.
“State agencies don’t legislate. They implement. Legislatures, not agency rule makers, define the consumer protections Illinois residents deserve. A bill purported to be about consumer protection should specify what those protections are,” said Brent Adams, Senior Vice President of Policy & Advocacy at Woodstock Institute and former Secretary of the Illinois Department of Financial and Professional Regulation, where he led rulemaking impacting thousands of financial institutions.
SB 3561 passed in the Illinois State Senate on Thursday, May 21. The bill is set to be heard in the House Judiciary Committee on Wednesday, May 27 at 8 am.
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Woodstock Institute is a leading policy and research nonprofit that advocates for consumer financial protection and community economic development. Our work seeks to combat structural inequities and improve the quality of life in lower-income neighborhoods and communities of color. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.
