New Jersey BNPL Bill A5664 Would License Klarna, Affirm Lenders

A New Jersey bill modeled on New York's BNPL law

New Jersey may become the second state to treat buy now, pay later lending as its own regulated business instead of a checkout feature. Assemblyman Chigozie U. Onyema, a Newark Democrat who represents District 28, has introduced Assembly Bill 5664, called the "Buy Now Pay Later Act." The bill would require BNPL lenders to get a license from the state's Commissioner of Banking and Insurance before lending to New Jersey residents.13 It was introduced on October 19, 2026.13 Onyema announced it a week later and pitched it as an affordability measure.14

According to coverage of the announcement, the bill would require licensing, set limits on fees and interest, require clearer disclosure of loan terms, impose responsible-lending standards and create procedures for resolving consumer disputes.12 News reports named the companies it would affect: Klarna, Affirm, Afterpay, PayPal, Sezzle and Zip.12 Onyema's own office added Synchrony and Splitit to that list. It also noted that newer competitors are entering the market, many funded by private equity and venture capital.14

The coverage has mostly described the bill as a homegrown crackdown. Read next to New York's law, it looks more like a copy. The bill's definition of a BNPL loan is closed-end credit tied to a particular purchase of goods or services, excluding motor vehicles and most credit offered directly by the seller.13 That wording closely tracks the definition in New York's Banking Law Article 14-B.2 The two-track system also matches. Most lenders would need a license, while state-chartered banks and existing licensed consumer lenders would instead need written authorization for each category of loan they want to offer. New York's statute works the same way.136 Like New York, New Jersey would split loans into zero-interest and interest-bearing categories and let the regulator create more by rule.136

That matters for how seriously the industry takes the bill. Fintech companies already have to build compliance systems for New York. A New Jersey law based on the same text would cost them less to follow than a new design, which could make it easier to pass.

What the bill would require

One detail most coverage gets slightly wrong: the bill does not write fee caps into law. It directs the commissioner to set a maximum total for all charges and fees in each loan category. The commissioner would also set limits on specific fees, including origination, late-payment and default fees, and could ban any fee outright.13 Each late payment or default could be charged only once.13 Headlines saying the bill "caps fees" are fair as shorthand, but the actual numbers would be set later by regulators, not by legislators.

The bill's other requirements go well beyond basic disclosure:

• Underwriting. Lenders would have to do "reasonable risk-based underwriting" before making a loan and tell borrowers what factors they considered.13
• Social-network scoring ban. Lenders could not judge a borrower's creditworthiness using the credit of people in the borrower's social network.13
• Credit-card-style dispute rights. Lenders would have to apply the federal Truth in Lending Act's credit-card rules on disputes and unauthorized charges to BNPL loans.13
• Data consent. Using, selling or sharing a borrower's data beyond the loan itself would require consent. Lenders could not make consent a condition of getting a loan, and they would have to delete the data if a borrower withdraws consent.13
• Void loans. A loan made by an unlicensed lender would be void, and the lender would lose the right to collect principal, interest or fees.13

The enforcement provisions are where New Jersey is tougher than New York. Consumers could sue individually, on behalf of similar consumers, or on behalf of the general public. Courts would have to award three times the damages or $1,500, whichever is greater, plus attorneys' fees.13 Some violations would be disorderly persons offenses, punishable by up to six months in jail, a fine of up to $1,000, or both.13 New York's statute treats violations as misdemeanors with fines of no more than $500.6 The private right to sue is probably the provision the industry will fight hardest. Fee caps can be negotiated during rulemaking. Class-action exposure with mandatory treble damages cannot.

If enacted, the law would take effect one year later and apply only to new contracts. The commissioner could start preparing before then.13

Why Klarna and Affirm would feel it differently

The two best-known BNPL brands have very different businesses, so the same law would hit them in different places. A Federal Reserve analysis of 2025 lending found that 71% of Affirm's $41.3 billion in credit issuance was in interest-bearing loans. At Klarna, 90% of its $23.9 billion was zero-interest.23 Affirm's own disclosures put its longer-term financing at 0% to 36% APR, with terms of up to five years.28

For Affirm, the most important provisions are the interest rules and the underwriting standard. The bill would bar charging interest unless the rate is allowed under the lender's license or authorization.13 For Klarna, whose business is mostly short, interest-free "pay in 4" loans, late fees and penalty charges matter more. Late fees are where the bill's supporters see the most harm.

That is also where New York shows what New Jersey's regulator might do. New York's draft rules would allow late fees of up to $8 without special approval, ban charging more than one fee for the same event, and cap total penalty fees at the original amount borrowed.4 Hoodline, citing CNBC, reported that some BNPL late fees already run $7 to $8 per missed payment.11 If New Jersey followed New York, the effect on today's typical fees might be smaller than the political rhetoric suggests. The bigger effect would be on fee stacking and on the worst outliers.

Context: a growing market and a pullback in Washington

The market is big and changing. Hoodline, citing CNBC, reported that BNPL providers issued nearly $157 billion in credit in 2025, up from about $116 billion the year before. Interest-bearing loans made up more than 37% of annual issuance in 2026, nearly double their 2021 share.11 The Federal Reserve's $156.7 billion figure for the U.S. market supports the scale of those estimates.28 The leading companies are now profitable. Affirm reported its first GAAP net income, $103 million, for the quarter ending March 2026, and Klarna posted $68 million in adjusted operating profit for the first quarter.27

The consumer-harm numbers depend on who is counting. Onyema relies on Protect Borrowers, which says nearly half of Americans have used BNPL and nearly half of those users missed a payment in the past year.12 An industry analysis gives a wider range, from 24% of users paying late in Federal Reserve data from 2024 to 47% in a 2026 LendingTree survey.27 The lower estimate still shows real stress among borrowers. But the "nearly half" figure in the bill's announcement is at the high end of the available data.

The main reason states are acting is that the federal government stepped back. In May 2024, the Consumer Financial Protection Bureau ruled that some BNPL products fall under Regulation Z, the federal credit-card disclosure rules. It withdrew that interpretation in May 2025.7 New York signed its BNPL Act into law the same month.6 Its Department of Financial Services published draft rules in February 2026.1 It formally proposed regulations in July 2026, with public comments due by September 14.9 Other states have also moved. In December 2025, attorneys general in seven states sent letters to Klarna, Affirm, PayPal, Afterpay, Sezzle and Zip asking about their lending and how they handle disputes.

Onyema said directly that he is responding to this situation. He argued that while Washington favors Wall Street and Silicon Valley, states have to regulate an industry whose business model, in his view, depends on missed payments.12

The outlook

The industry's public position is that it welcomes regulation. When New York formally proposed its rules, the Financial Technology Association said it supports regulation that reflects standards leading firms already follow.9 Affirm has said it supports "thoughtful regulation and consistent industry standards." Those statements suggest companies will accept licensing and disclosure rules but push back on terms that go further than New York's, especially the private right to sue.

The bill is likely to change during the legislative process. Because its core is nearly identical to New York's law, the realistic question is not whether New Jersey regulates BNPL. It is whether the state adopts New York's framework as written or adds stronger enforcement on top of it. If New Jersey passes it and other states copy the same text, a de facto multistate standard would emerge, which is what New York's approach was expected to produce.5 That standard would replace the federal rule that was withdrawn.