UPDATE: FASHION RESALE NEWS

• ThredUp parters with a grocery store

• The Salvation Army launches on Roblox

• The RealReal showing positive. signs, yet still not profitable

• Louis Vuitton loses trademark case initiated in 2022 in South Korea

February 26, 2026 - ThredUp announced a new Clean Out Program and its first grocery partner, Misfits Market, an online subscription-based grocery delivery service that can be paused or canceled at any time. Misfits Market focuses on sustainability by selling “misfit” items, blemished, oddly sized or surplus organic fruits and vegetables, as well as plant-based, gluten-free, sustainable dairy and meat products alongside other core grocery categories. With a goal of reducing food waste, Misfits Market partners with farmers and producers to sell items often rejected by traditional supermarkets.

According to a press release, “Misfits Market joins more than 50 other brands offering resale programs through ThredUp’s Resale-as-a-Service® (RaaS®).” Recent new RaaS partners include Lands’ End, New York & Company, and Cotopaxi.

The Misfits Market x ThredUp partnership is a logical fit: ThredUp is known for tackling fashion waste, while Misfits Market is known for rescuing food. For consignors, the key benefit is that once their clothes sell, they can convert their payout into credit for a future Misfits Market order. The Clean Out experience mirrors other ThredUp run programs: customers use a prepaid shipping label, fill a box with preloved clothes, ship it to ThredUp, and once the accepted items sell, they receive credit to spend with the partner.

The Misfits Market x ThredUp information page is notably clear and robust, with a “Must read quality checklist,” a “What we can’t resell” section, and a comprehensive FAQ. It links to a list of ineligible brands, shows a table of payout percentages, and includes a sample timeline for payment. A bold statement on the page highlights: “For a limited time, earn an extra 15% in Misfits Market shopping credit,” though no specific end date for this bonus is provided.

ThredUp has also recently made a number of changes to its fee and payout structure that significantly affect what sellers earn, with the most notable shift toward a high-quality-only model in which many low- to mid-tier items now yield minimal returns after fees. (Those changes, which have drawn negative reviews from mid and long term consignors will be covered in future posts.)

February 19, 2026 - The Salvation Army launched “Thrift Score,” referring to is as the world’s first digital thrift store on Roblox. It was designed to introduce the Salvation Army brand to a younger audience, Gen Z and Gen Alpha in the space which is already familiar to them as this is where they already shop and play.

According to the press release: "Thrift Score" reimagines a Salvation Army Thrift Store as a fully explorable and shoppable digital environment, Stocked with creator and brand collaborations, player donations, and digital replicas of real Salvation Army items, players can browse racks to uncover rare and limited edition items at accessible price points. “Thrift Score” is also integrated into popular Roblox games, including Seaboard City and Daycare.”

Additionally, the experience includes special, limited-edition user generated content items donated by some of Roblox's most influential creators, including @PrestonPlayz, @BriannaPlayz and @RussoPlays, each contributing their own take on thrift-inspired digital fashion.

Similar to the real world, "Thrift Score" proceeds support The Salvation Army's mission to help people in need through rehabilitation, recovery and community programs nationwide.

Check this out: https://tinyurl.com/mtmjkzbd

February 26, 2026 - Rati Levesque, President and Chief Executive Officer of The RealReal (TRR), stated in a press release: “2025 was a year of transformation for The RealReal.” Of note, she added: “We surpassed the $2B mark in GMV and delivered positive adjusted EBITDA in every quarter for the first time. These defining milestones reinforce our confidence in our growth trajectory and our market leadership position.”

For the year ended December 31, 2025, revenue rose 15% to $693 million. Though the company posted a loss for the year, the loss decreased for the fifth consecutive year to $41.8 million, down from $134.2 million the previous year.

While presenting the results, management highlighted that TRR’s use of AI and automation had a positive impact on its operations. TRR's proprietary technology, Athena, is an AI tool that enables the intake process and blends human expertise with technology and is a part of the authentication process. Management noted, “By automating the repetitive, data-driven tasks, we are reducing costs and increasing speed to site.” The Athena enabled product intake process achieved TRR’s year-end goal of 35% of all units fully flowing through the system.Management’s update also highlighted SmartSales, another proprietary AI tool which helps frontline “luxury managers” identify which clients are most likely to consign.

Chanel, Inc. v. The RealReal, Inc.

While not discussed in the press release, the lawsuit Chanel filed against The RealReal is something to watch, as the outcome could have a significant impact. In November 2018, Chanel filed a lawsuit against TRR in the Southern District of New York, alleging that TRR sells counterfeit Chanel products and falsely advertised them as “100% authentic,” while creating the false impression that Chanel had authenticated or was affiliated with the goods.

In 2019, Chanel’s amended complaint updated the claims of trademark infringement, counterfeiting, false advertising, unfair competition, and New York statutory violations. The RealReal responded with a motion to dismiss, claiming first sale and nominative fair use protections for its use of Chanel’s marks and its authentication messaging.

In March 2020, the court granted TRR’s motion to dismiss in part and denied it in part, tossing Chanel’s core trademark infringement, false endorsement, and New York General Business Law claims. However, it permitted the counterfeiting, false advertising, and common-law unfair-competition claims to proceed. Subsequently, in 2021, TRR filed an amended answer adding antitrust and tortious interference counterclaims. Chanel moved to dismiss those counterclaims and to strike TRR’s “unclean hands” defense, widening the scope to include Chanel’s conduct in the luxury resale market.

Between 2021 and 2025, there was mediation and stays of discovery, along with a number of failed settlement efforts. In May 2025, Judge Gorenstein described it as one of the oldest matters on the Court's docket and began pressing the parties to move forward.

The court is scheduled to hold a status and scheduling conference in the case in March 2026 to restart discovery and move the long‑running trademark and counterfeiting case toward trial.

February 26, 2026 - Louis Vuitton lost its trademark infringement lawsuit in South Korea against a company that used Louis Vuitton materials supplied by its customers and upcycled them into different products for those customers’ personal use. The suit was filed in 2022, claiming that between 2017 and 2022 the defendant infringed Louis Vuitton’s trademark rights by undermining the brand’s source‑identification and quality‑assurance functions.

Initially, Louis Vuitton prevailed in the lower courts, which ordered the defendant to cease manufacturing these items and to pay 15 million won in damages. However, in a landmark decision, South Korea’s Supreme Court overturned the lower‑court rulings and held that providing transformation services commissioned by owners for personal use does not constitute “use of a trademark” under trademark law.

For those in South Korea focused on sustainability and circularity, this is a positive decision, so long as the upcycled items remain for personal use only. It is critically important to note that this ruling applies only in South Korea; courts in other countries, including France and China, have previously ruled in favor of the luxury brand when similar cases were brought.

Full Disclosure: The content in this post is for general informational purposes only and is not intended as, nor does it constitute, professional, financial or legal advice. Research for this post ended on March 2, 2026. I participate in reselling on the Poshmark, Vinted, Mercari and The RealReal platforms. I have not had any disputes with them, nor have they provided me with any benefits except for payments of items sold via their platforms. All opinions are my own, and I have not received any compensation for writing this post. Readers should not act upon this information without seeking professional counsel licensed in their specific jurisdiction.

FEBRUARY HAPPENINGS IN FASHION RELATED RESALE

On February 16, 2026 Depop launched a U.S. campaign,“Depoponomics”, directed by Dave Meyers a grammy award winner and featuring singer songwriter Kelis. Per the announcement: “Depoponomics is a national U.S. campaign that redefines resale as a modern personal economy, where selling clothes helps fund everyday life." The campaign includes a cameo appearance by the pop/ R&B singer, Kelis. Her 2003 single "Millionaire" provides the soundtrack for the spot. The ads are on tv, digital and video and will run through May 31st. These Depoponomics spots note there are no selling fees and also clearly informs in the fine print "Payment processing fees and boosting fees still apply."

As part of the campaign, Kelis launched her own Depop shop, listing about a dozen items,

including pieces worn by her in the campaign. A screenshot of the top portion of her Depop shop is below and another screenshot follows showing the remaining item for sale in her shop.

On February 23, 2026, one item in her shop remained, a Ganni blouse and I noticed the price was reduced by $10 from when it was originally listed on February 18, 2026. I was surprised that the blouse had not yet sold, had been reduced and that so few of her items were listed. Perhaps more will be included in the future.

On February 18, 2026 The RealReal announced it will be reopening its flagship San Francisco store for consignment and shopping, bringing it to 17 locations throughout the US.

TheRealReal has been slowly adding permanent locations including one in 2025: Summit, New Jersey and two in 2024: Miami Design District which is the second store in Florida (A store is in Palm Beach) and Houston, Texas, its second store in Texas, with Dallas being the other location. (Note: As of this writing, the company's website includes a note about a limited time consignment event in Tampa, Florida. However, when clicked that, the page that appeared states: "Oops! Looks like the page you requested is not available."

Officially opening on February 26, 2026, it is a two story 8,100 square feet space in Union Square and the address is 253 Post Street. The RealReal was founded in San Francisco in 2011 and it sounds like this store has been thoughtfully planned with unique features.

The press release notes: "A curated mix of San Francisco inspired art, locally sourced vintage furniture, and thoughtful architectural details grounds the store in the city’s creative spirit, blending heritage, sustainability, and modern luxury. On weekends, the store will host coffee from Painted Leopard, a woman-owned specialty coffee roaster known for its single-origin blends and popular pop-ups."

On February 18, 2026 Etsy which acquired UK based Depop in 2021 for about $1.62 billion announced that it was selling it for $1.2 billion (all cash deal) to eBay, with the acquisition expected to close by the end the second quarter of this year.

It is expected that Depop will retain its name and platform. This looks to be a good purchase for eBay as it will grow eBay’s market of GenZ consumers. Press releases note that Depop has seven million active buyers, with nearly 90% of them under the age of 34, and over 3 million active sellers. For eBay, the acquisition bolsters its position with younger consumers who have a strong interest in resale and increasingly view secondhand as a normal way to shop. Depop, in turn, should benefit from eBay’s global capabilities, including its international reach, marketplace infrastructure, and operational expertise.

According to an eBay press release:"The addition of Depop will accelerate eBay’s C2C strategy by deepening its reach with younger, fashion-forward consumers and expanding its presence in one of the most dynamic areas of resale. As part of eBay, Depop will benefit from eBay’s global scale and suite of capabilities, including its financial services, shipping solutions, and trusted experiences like Authenticity Guarantee to further accelerate growth and enhance the buyer and seller experience."

In early February Sydney, Australia based Cosette, a luxury handbag reseller that has been operating for about 11 years announced it would be closing. In its announcement, it stated: "Unfortunately, the market has changed and we – rather than our mission to make luxury more affordable, every day – were sometimes the story." The part "were sometimes the story" warrants explanation.

Starting in 2023, nearly one thousand customers complained to NSW (New South Wales) Fair Trading alleging that Cosette was selling "superfakes", high-quality counterfeit handbags priced near authentic retail rates. Many of these claimants provided third-party authentication reports to support their allegations; however, Cosette consistently denied any wrongdoing.

Following a year long investigation, the regulator reported in 2024 that it found no evidence of counterfeit sales. Crucially, the items examined by the regulator were confirmed as authentic by the brands themselves. NSW Fair Trading also cast doubt on the reliability of certain third-party authentication services, citing vague disclaimers and a lack of identifiable expertise.

Cosette highlighted its clearance by NSW Fair Trading and continued to operate, although it had already scaled back significantly during the investigation. While the company cited "changing market conditions" in announcing its closure this month, the sheer volume of complaints and the resulting reputational damage appear to have been difficult to overcome and likely contributed to its decision to shut its doors.

Full Disclosure: The content in this post is for general informational purposes only and is not intended as, nor does it constitute, professional, financial or legal advice. Research for this post ended on February 23, 2026. I participate in reselling on the Poshmark, Vinted, Mercari and The RealReal platforms. I have not had any disputes with them, nor have they provided me with any benefits except for payments of items sold via their platforms. All opinions are my own, and I have not received any compensation for writing this post. Readers should not act upon this information without seeking professional counsel licensed in their specific jurisdiction.

LUXURY RESALE - WHAT'S ON THE LEGAL RADAR FOR 2026?

The fashion and resale markets generated considerable news and optimism for growth over the last year, driven by growing comfort with buying secondhand, Gen Z participation, sustainability concerns, and consumer reactions to announced tariffs.

In luxury resale, especially handbags and watches, many observers have predicted that repeated retail price increases would send more buyers to the secondary market. In some cases, that premium has flipped entirely, with certain Hermès Birkin handbags and Rolex watches reportedly reselling for more than their original retail prices on fashion and related resale platforms.

At the same time, 2025 headlines in luxury resale were dominated by authentication concerns, “superfakes,” and a growing list of complaints about platform policies and customer service. As volumes rise, legal scrutiny is rising with it. In 2026, luxury resale platforms are operating in a landscape that is increasingly protective of brand aura and focused on consumer transparency, meaning legal risk is moving from background noise to a core strategic issue.

Based on ongoing review of the luxury resale market, several legal issues stand out as having wide ranging implications for platforms and brand owned resale programs. This post highlights a few of the topics that luxury resale operators need on their radar to stay ahead of the curve. Several other legal related topics will be covered in future posts, including EU regulations. The information in this post is for general informational purposes only and is not intended as, nor does it constitute, legal advice or professional advice.

Resale Platform Models

There are three primary models in luxury resale, and while each has its own operating playbook, they share many of the same legal risks and potential rewards. These three models are: peer‑to‑peer marketplaces, managed consignment marketplaces, and brand owned resale programs.

Peer‑to‑Peer Marketplaces

Peer‑to‑peer platforms provide the technology infrastructure and rules that connect buyers and sellers. They do not take possession of inventory. The seller is responsible for photographing the item, writing the description, posting the listing, and shipping directly to the buyer. Examples include Poshmark and Depop.

Some peer‑to‑peer marketplaces add a step for higher value items in specific categories. When an item sells above a certain price threshold, it must be sent to the company’s authentication center before shipment to the buyer. Platforms such as Vestiaire Collective, eBay, and Poshmark incorporate this kind of authentication process for select listings. (Note there are different policies among these three platforms.)

Managed Consignment Marketplaces

Managed consignment or managed marketplaces act as intermediaries, taking possession of inventory and managing the resale process.. These companies authenticate incoming items, set pricing, take photos, write and post the listings, ship the orders to buyers, and then pay the original owner, whether on a consignment basis or through an outright buy out.

Examples in this category include Fashionphile, MyGemma, and Bag Borrow or Steal. These companies tout authentication, curation, and customer experience as part of their value proposition. This model tends to concentrate legal risk at the platform level because the company is involved in both representation and handling of goods.

Brand Owned Resale Programs

Fashion brands are increasingly launching brand owned resale programs in partnership with technology providers that specialize in resale operations. In these models, the original brand sells its own pre‑loved goods through take back programs (often in exchange for store credit -- in-store or online) and/or peer‑to‑peer platforms operated under the brand’s label.

Examples include Oscar de la Renta Encore (with Archive), Victoria Beckham’s The Re‑Loved Archive (with Faume), and Canada Goose Generations (with Trove). These branded programs are not one‑size‑fits‑all. Each has its own platform architecture and policies around accepted categories, original sale dates (for example, only items from recent seasons), and payout or credit structures, including where and how credits can be used.

While these three models differ in how hands‑on they are, they are all entering a 2026 legal environment that is more protective of brand identity and more demanding on consumer‑facing disclosures. From high‑profile trademark battles to new rules on digital transparency, luxury resale is starting to look and feel more regulated.

Lawsuits Reshaping Luxury Resale

Lawsuit: Chanel v. What Goes Around Comes Around (WGACA)

The legal battle between Chanel and luxury reseller What Goes Around Comes Around (WGACA) began in March 2018 in the U.S. District Court for the Southern District of New York and has become one of the most closely watched cases in the resale sector.

Chanel’s complaint covered these main issues:

• False Association: Chanel argued that WGACA’s marketing (using Chanel’s logo and hashtags like #WGACAChanel) misled consumers into believing there was an official partnership or endorsement between the two companies.

• The Sale of "Non-Genuine" Items: Chanel argued that WGACA sold items that, while potentially made by Chanel factories, were never authorized for sale. This included Point of Sale (POS) items such as display mirrors, tissue boxes, and VIP gifts-with-purchase that Chanel never intended to enter the commercial market.

• Stolen/Voided Serial Numbers: Chanel argued that 13 handbags bore serial numbers that had been stolen from a Chanel factory in Italy years prior and subsequently voided in Chanel's internal database.

In February 2024, a jury found WGACA liable for willful trademark infringement, false association, unfair competition, and false advertising and awarded Chanel $4 million in statutory damages. The Court later entered judgment imposing a permanent injunction restricting how WGACA can use Chanel’s trademarks and branding, including limits on hashtags and discount codes, and requires clear disclaimers that WGACA is not an authorized reseller Additionally, Chanel obtained more than $560,000 in litigation costs, though its request for $6.7 million in attorney’s fees was denied.

Current Status (January 2026): The case is currently on appeal in the U.S. Court of Appeals for the Second Circuit and the $4 million award stands for now. Whatever the outcome is on appeal, the message to resale operators is that courts are increasingly willing to scrutinize how platforms invoke brand names and to treat “willful blindness” around sourcing and that serial numbers as a serious issue.

Luxury Resale Compliance Checklist

For industry players, the immediate question is how to convert these developments into practical risk controls. The following 2026 checklist is a starting point for keeping luxury resale platforms off the litigation radar.

1. Marketing and social media

The Court ruled that "nominative fair use" allows the reseller to name the brand to describe the bag, but it cannot co-opt the brand’s identity.

Hashtags: Don't use combined hashtags such as #WGACAChanel. Use independent tags instead.

Discount Codes: Do not use codes such as "HERMES10" or "COCO25" that leverage a brand’s intellectual property or founder’s name to drive sales.:

2. Inventory and “non‑genuine” sourcing filters

The First Sale Doctrine only protects the reseller if the brand originally intended the item for retail sale.

Exclude point‑of‑sale items: Remove display pieces, such as branded tissue boxes, and VIP “gift with purchase” items that were never sold at retail, as these can be treated as non genuine in the trademark context.

​3. Authentication and serial‑number provenance

Platforms are being held to a "willful blindness" standard regarding stolen goods.

Serial number checks: For brands that publish or share stolen number ranges, cross‑reference inventory against those ranges; Chanel’s stolen 17 million series numbers are a prominent example in this recent litigation.​

Disclaimers and independence: Prominently state that the platform is not an authorized reseller or affiliated with the brands it sells and that authentication is conducted independently, without endorsement from brand owners.​s.

4. “Material difference” and restoration

The "First Sale Doctrine" can be voided if a product is "materially different" from the original.

Restoration refurbishment disclosures: If a handbag has been re‑dyed, had hardware changed, or undergone a “spa” process involving non‑original parts, clearly label item “restored,” “altered,” or similar language so buyers understand what they are buying.

No “Frankenstein” inventory: Do not sell items assembled from parts of multiple authentic piece, leading to what is known as “Frankenstein” bags. These hybrids raise both authenticity and trademark questions, even where components began as being genuine.

Junk Fees, Returns, and Drip Pricing

Lawsuit: Fadrigo v. The RealReal, Inc.

In July 2025, a putative class action suit was filed against The RealReal in California, challenging a $14.95 “Return Shipping and Processing Fee” (RSPF) charged on returned items. The complaint alleges that the fee is a classic “junk fee,” a mandatory charge that is not clearly disclosed during checkout and that allegedly exceeds the actual cost of returns processing, effectively turning the fee into a hidden profit center.

The case, now in the U.S. District Court for the Central District of California, focuses on two core issues:

1. Whether the fee was adequately disclosed at the time of purchase.

2. Whether its amount of the fee bears a reasonable relationship to the underlying logistics costs.

Current Status (January 2026): The case is currently in the U.S. District Court for the Central District of California (after being removed from state court). A pivotal hearing is scheduled for February 13, 2026 that concerns a "Motion to Compel Arbitration."

The RealReal is attempting to use the fine print in their Terms of Service to move the case into private arbitration. If The RealReal wins this motion, the class action is effectively over, and individual customers would have to sue one by one, which is a win for the platforms.

If the judge denies the motion, it signals to platforms that their Terms of Service might not be enough to save them from "junk fee" litigation in court. This could force an industry shift where platforms must show return fees as prominently as the item price to avoid "junk fee" liability.

While the Fadrigo case specifically targets a return fee, it sits at the heart of a much larger controversy, Drip Pricing. Drip pricing is a deceptive pricing technique where a company advertises only a portion of a product's price and then reveals additional fees as the consumer proceeds through the buying process. The goal is to hook the consumer with a low headline price before they realize the final cost is significantly higher.

Return Fees Compliance Checklist Audit

For luxury resale platforms that charge any return shipping, restocking, or processing fee, 2026 is the year to treat return policies as a regulatory risk, not just a customer service issue. The following 2026 checklist is just a starting point.

Checkout transparency: Under California’s “Honest Pricing Law” (SB 478) and similar state statutes, mandatory fees must be disclosed upfront; the first price the consumer sees should reflect the “all in" cost, excluding only allowable items such as taxes and certain shipping charges.

Order Summary Detail: Ensure that any return related fee appears as a clearly labeled line item (for example, "Return Shipping & Processing Fee”) in the order summary before the customer clicks “place order,” rather than being buried under vague labels such as “handling.”

Cost Linkage: Review whether each return fee is in line to actual costs, such as carrier rates and processing labor, rather than functioning as a margin enhancer. Note that tiered fees based on weight or category could help demonstrate a cost recovery intent.

Terms of Service Mechanism: Ensure users actively assent to updated terms through clickwrap agreements, as passive browsewrap implementations (footer links only) are under increasing scrutiny in consumer cases.

Buy Now Pay Later (BNPL) Regulations

For many shoppers who want to buy luxury goods, the decision to do so is financially out of their reach. Also there are those who could easily handle paying the one lump sum might decide not to do so.

To attract buyers, many platforms have been offering a third party payment plan option. The plans are called Buy Now Pay Later (BNPL). Typically the purchase can be paid for over four interest free payments and the buyer does not have to wait to receive the bag until all payments are made. The option to use BNPL is available at checkout. Each BNPL company has its own features, fees and policies. Leading providers include Klarna, Affirm, and PayPal. The Buy Now Pay Later industry has been the focus of federal legislation and also individual states.

BNPL is a Double Edged Sword

Before looking at the legal risks, it’s important to recognize that BNPL introduces significant operational headaches for luxury resellers. While it attracts buyers by lowering "sticker shock," it also facilitates costly consumer behaviors, including those noted below.

Wardrobing:Though BNPL lowers the initial cost of the purchase, it could lead to an increase in "wardrobing." In this scenario a customer buys an item, wears it for a specific event, and then returns it. Since the buyer has laid out just a small fraction of the total price, the psychological and financial barrier to renting luxury goods for free is significantly reduced. However, resellers then must expend extra employee time and resources to inspect and relist items that have been returned. Plus, there could be quite a bit of time consuming back-and-forth between the customer and the reseller if the return is initially denied.

Bracketing Combined with Buyer’s Remorse: BNPL makes it easy for consumers to bracket their purchases. For instance, the purchaser could buy several versions of a similar high ticket item using different BNPL partners. Once those individual payment schedules start to pile up, buyer’s remorse could sink in. The resale platforms would then need to deal with returns as outlined above. Not only are sales lost because of the returns, they take on added manual labor time.

Consumer Financial Protection Bureau

In May 2024, the CFPB (Consumer Financial Protection Bureau) issued a landmark Interpretive Rule officially classifying BNPL providers as "credit card issuers" under Regulation Z (the Truth in Lending Act). Even though BNPL is often interest free and has only four installments, the CFPB determined that the digital accounts used to access these loans function as credit cards.

Throughout 2024 and 2025, the CFPB attempted to bring the BNPL industry under federal control by classifying digital accounts as credit cards, granting those who used BNPL the same protections as traditional Visa or Mastercard users, covering dispute rights and refund guarantees.

This rule was called landmark because, for the first time, the CFPB officially treated BNPL credit products as subject to credit card protections under federal law, which was a significant shift from the longstanding view that these payments were outside Regulation Z. It effectively changed how many BNPL lenders would need to operate if the rule remained in force long term.

After leadership changes at the CFPB on May 6, 2025, the CFPB retreated, announcing it would not prioritize enforcement of its rule that classified BNPL providers as credit card issuers.

States Enact "Mini-CFPB" Laws

As federal oversight of the "Buy Now, Pay Later" (BNPL) industry has pulled back, a new wave of state evel "Mini-CFPB" laws has taken center stage. Leading the charge are New York (The BNPL Act) and California (SB 825), both of which rhave been fullly implemented on January 1, 2026.

These state agencies now hold significant power, including:

• The power to void BNPL loans.

• Levy heavy fines for "drip pricing," the hidden fees.

• Freeze a reseller's ability to process payments if their third party partners, such as Klarna, Affirm, Klarna, Afterpay aren't locally licensed.

1. The New York BNPL Act

Enacted as part of the New York FY2026 budget, this is now considered the most comprehensive BNPL law in the nation. It transforms BNPL from a "fintech loophole" into a regulated financial product. The law forces BNPL lenders to offer the same dispute and refund rights as credit cards, essentially codifying the rule the CFPB walked away from.

A Licensing Mandate: Every BNPL provider must be licensed by the NY Department of Financial Services (DFS).

The "Unlicensed Lending" Concern: If the financing partner isn't licensed in New York, the resale platform could be held liable for "facilitating unlicensed lending." In New York,

loans made by unlicensed entities can be declared void and uncollectible.

Key Note: The law applies to any BNPL loan made to a "consumer," which the Act defines as an individual who is a New York resident. So, even if a luxury reseller is based in Florida and sells a luxury watch to a customer in New York using a BNPL service, the transaction must comply with New York’s licensing, disclosure, and "ability to repay" standards.

"Ability to Repay" Standards: New York now mandates "risk-based underwriting." Lenders must verify a consumer's ability to pay before the loan is issued. This is an attempt to prevent "phantom debt" where consumers over leverage themselves.

Phantom debt is consumer debt that is actually a real debt and is is enforceable. However, it is not fully visible, or or tracked by lenders, nor consumers and even regulators when credit decisions are made. Because many BNPL transactions are not consistently reported to the major credit bureaus, this debt exists "off the books" of a typical credit report. As of 2026, reporting practices still vary significantly by BNPL provider and product. for example, while a longer-term monthly installment loan is tracked a four payment installment plan might not be reported.

2. California’s SB 825: Ending the "UDAAP" Shield

Effective January 1, 2026, California's SB 825 closed a major regulatory loophole. Previously, many licensed lenders were exempt from certain oversight by the Department of Financial Protection and Innovation (DFPI) under the original California Consumer Financial Protection Law. However, this is no longer.

Note: California is now specifically targeting "loan stacking," the risky practice where a customer takes out multiple BNPL loans across different platforms simultaneously, leading to an invisible debt spiral.

Immunity ended: The new law clarifies that even licensed banks and fintechs are fully subject to DFPI enforcement regarding Unfair, Deceptive, or Abusive Acts or Practices (UDAAP).

Third-party liability: The DFPI has clarified that its authority extends to "third-party service providers." If the BNPL partner utilizes a deceptive user interface (UI), California can hold the resale platform responsible for that consumer's experience.

Drip pricing enforcement: This gives California the the right to sue companies specifically for drip pricing. In the context of the Fadrigo v. The RealReal case, this includes practices like hiding a "Return Shipping and Processing Fee" (RSPF) or failing to disclose the total cost of a BNPL loan until the final click.

Direct enforcement: Even if a platform is already licensed by the DFPI, this financial watchdog can now sue the BNPL provider directly for UDAAP violations, bypassing previous administrative hurdles.

For luxury resale platforms, being "compliant on a national level" is no longer enough. To protect your business in 2026, you must be compliant on a state-by-state basis, starting with the rigorous standards set by New York and California.

BNPL Partner Checklist Audit

The following 2026 checklist is a vital starting point for any platform utilizing Affirm, Klarna, Afterpay or similar financing services. To avoid "facilitator liability" under new state laws, your legal team should verify these three areas of compliance:

1. Licensing Status

Question: Are you currently licensed or authorized under the New York BNPL Act (Article 14-B) and the California Financing Law?

The Risk: In New York, if a provider is unlicensed, the loans they issue to NY residents can be declared void and uncollectible. As a reseller, you do not want to be the at risk for an illegal lending operation.

2. The "Refund Loop" Protocol

Question: When a returned is triggered by the resale platform, do you immediately pause the customer’s next installment, or do you continue charging them until the refund is fully cleared?

The Risk: Continuing to collect payments on a returned item is considered an Abusive Practice under the 2026 expansion of UDAAP laws. California’s DFPI and the NY Attorney General are specifically targeting "phantom payments" that occur while a consumer is waiting for a return to be processed.

3. Data and Surveillance Disclosure

Question: Do you clearly disclose if you use customer data for "Surveillance Pricing" or algorithmic credit limits, and are you compliant with the NY Algorithmic Pricing Disclosure Act?

The Risk: Since late 2025, New York law requires a prominent notice"THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA" if a price or credit limit is adjusted based on browsing history or zip code. If your BNPL partner’s "instant approval" logic uses this data without disclosure, your platform could be cited for lack of transparency.

Future Legal Topics to be Covered : This post highlighted only a few of the critical legal shifts currently impacting luxury resellers. There are more topics t be covered and also as the landscape continues to evolve in 2026, I will be reviewing other timely topics in future posts, including new EU regulations.

Full Disclosure: The content in this post is for general informational purposes only and is not intended as, nor does it constitute, professional, financial or legal advice. Research for this post ended on January 8, 2026. I participate in reselling on the Poshmark, Vinted, Mercari and The RealReal platforms. I have not had any disputes with them, nor have they provided me with any benefits except for payments of items sold via their platforms. All opinions are my own, and I have not received any compensation for writing this post. Readers should not act upon this information without seeking professional counsel licensed in their specific jurisdiction. Images in this post were generated by Gemini AI Pro and Perplexity AI Pro.