Illinois Buy Now, Pay Later Law: Oversight, Registration, and Consumer Protection

Illinois moved to regulate buy now, pay later financing, with Gov. J.B. Pritzker of Illinois approving a statute that establishes a statewide framework for this fast-growing fintech sector.

Buy Now, Pay Later: Key Takeaways

• Buy now, pay later companies are brought under state supervision by the Illinois Department of Financial and Professional Regulation.
• Providers are required to register.
• Providers must establish consumer refund and dispute-resolution procedures.
• Full compliance is required by Jan. 1, 2028.
• The law’s stated aim is to protect consumers by setting clear expectations for borrowers and enforceable obligations for lenders.

Policy Insight: Disclosure and Borrower Safeguards

Illinois’s framework parallels rules New York adopted last year. It requires upfront disclosure of all costs tied to a buy now, pay later loan, including the total amount due, the number and timing of installments, any interest or finance charges, any late or other fees that could apply, and key consequences of nonpayment such as collections activity or credit reporting, where applicable. It also requires lenders to evaluate a borrower’s ability to repay.

When installment plans are offered at checkout, the consumer-protection test is whether the price, the payment schedule, and the consequences of missing a payment are as clear as the “buy” button.

In the statute, coverage turns on whether a provider is offering a buy now, pay later product to an Illinois consumer as a short-term installment obligation used to finance the purchase of goods or services. The act generally focuses on nonbank providers, while traditional banks and credit unions that are already regulated as depository institutions are typically treated differently under state law; where a bank offers the product directly, it may fall outside the act’s registration approach, but nonbank partners and service providers can still be subject to the law’s requirements.

On underwriting, Illinois does not set a single mathematical test, but it expects providers to use reasonable policies and procedures to assess repayment ability before extending credit. In practice, that can mean reviewing available indicators such as stated or verified income, recurring obligations, existing payment-plan commitments, and the consumer’s prior performance on similar obligations, with documentation sufficient to show the assessment was actually performed.

The law also addresses how consumer information is used in these products. It limits the use of certain categories of consumer data for underwriting or servicing decisions and restricts reliance on “social credit scoring” approaches that draw on factors unrelated to a consumer’s finances—such as social relationships or online behavior—as a basis for granting, pricing, or denying a plan.

Sen. Michael Hastings, a Democrat from Frankfort who led the Senate bill, said the market had looked like a lawless frontier—selling checkout affordability while hiding fees and pushing families toward unsustainable debt—during the livestreamed signing event.

Lawmakers advanced the measure as more households lean on these plans for everyday spending, including groceries (29% and rising), rent, and other essentials, said Matt Marshall, spokesperson for Senate Democrats in Illinois.

Pritzker appeared with Democratic legislators and Attorney General Kwame Raoul at Chicago’s Concord Music Hall, chosen to spotlight two other consumer bills signed the same day: a ban on bots that snap up live-event tickets and a curb on resellers listing tickets they don’t actually possess. While the buy now, pay later statute sets out a supervisory and compliance structure, the attorney general’s office can still play an enforcement role by investigating deceptive or unfair practices tied to these products under Illinois consumer-protection authorities; the signing event did not describe a separate, named inquiry aimed at specific lenders, but any such investigation would typically focus on marketing claims, fee and term disclosures, underwriting and servicing practices, and the handling of consumer data.

Separately last week, the governor enacted the Digital Asset Tax Act, imposing a 0.2% levy on cryptocurrency transfers by Illinois residents starting Jan. 1, 2027; that provision is part of the state budget Pritzker signed on June 16.

Pritzker also approved the Junk Fee Ban Act, which bars businesses from advertising prices that omit mandatory charges. The measure targets hotel “resort fees” and add-on charges by rideshare and food-delivery platforms that aren’t shown in the initial price.

Those drip fees total about $3,000 per family each year, Raoul said.

In a separate effort to lower consumer costs, lawmakers pursued limits on payment card interchange by prohibiting card fees on the tax and gratuity portions of transactions.

The state’s interchange-fee restriction has faced litigation since 2024, and the legislature has twice voted to delay its effective date.

For information and updates, consumers and providers can consult the Illinois General Assembly’s website for the enacted bill text and any future amendments, the Illinois Register for notices and adopted administrative rules, and official announcements from the governor’s office and the Illinois Attorney General’s consumer-protection resources. Compliance-oriented updates are also typically posted through the state’s licensing portal and related regulatory bulletins.