The CFPB said BNPL lenders will be treated similarly to credit cards. (iStock)
The Consumer Financial Protection Bureau (CFPB) will apply credit card rules to buy now, pay later (BNPL) products.
As a result, according to the CFPB, BNPL lenders must comply with the federal Truth in Lending Act (TILA) and Regulation Z rules that apply to credit cards. statementThis means that consumers will have important legal protections and rights that apply to traditional credit cards, including the right to dispute charges and demand refunds from lenders after returning items purchased through BNPL services.
About the CFPB Report to be published in 2022 It found that more than 13% of BNPL transactions resulted in a billing or return dispute: In 2021, consumers disputed or returned $1.8 billion in transactions across the five largest BNPL companies.
Until now, the CFPB has not regulated BNPL providers, but the rapid growth of the sector has raised regulatory concerns from consumer watchdog groups. In issuing interpretive rules, the CFPB has sought to ensure that BNPL lending programs do not gain an advantage by circumventing certain Regulation Z requirements that traditional credit card issuers are subject to. Kilpatrick Townsend & Stockton LLP.
“When consumers select ‘buy now, pay later’ at checkout, they don’t know whether they’ll get a refund if they return an item or whether their lender will help them if they don’t get what was promised,” CFPB Director Rohit Chopra said. “Whether shoppers use a credit card or ‘buy now, pay later,’ they are entitled to important consumer protections under long-standing laws and regulations already in place.”
Paying off high-interest debt with a low interest rate using a personal loan could help you reduce your expenses and put money back in your wallet. Visit Credible today to find rates tailored to you.
Biden to give homebuyers $400 a month: State of the Union
Consumers at high risk of becoming overindebted with BNPL
Many consumers are using buy now, pay later (BNPL) services, attracted by their accessibility, but a recent Achieve survey shows they are at risk of overborrowing. investigation.
More than a third (34%) of respondents said they like BNPL services because they allow them to pay for purchases in instalments without paying interest, and 22% said they like the option because it is more accessible than credit cards. Additionally, 76% said BNPL has improved their overall financial situation.
BNPL providers partner with retailers to allow shoppers to split the cost of their online purchases into multiple installments at checkout. Part of the appeal of these installments is that they usually begin within weeks of purchase and are interest-free. What’s more, this payment option doesn’t require a credit check or down payment, as credit cards and layaways do.
However, the survey found that BNPL is also sometimes used by consumers with bad credit histories who already have debt issues, and 78% of respondents said that using BNPL makes it easy to overborrow.
BNPL services are just one alternative to credit cards. If you’re struggling to fund a big purchase, a personal loan might be a good option. Visit Credible to check out personal interest rates without impacting your credit score.
Homebuyers save thousands as mortgage rates fall: Redfin
How to manage BNPL debt
More than half (56%) of respondents in Achieve’s research said keeping track of multiple BNPL transactions is a daunting task, so keeping an up-to-date list of all your outstanding BNPL transactions is one way to stay ahead of your debt management.
Achieve recommends that consumers record each transaction, the name of the BNPL provider, the number of remaining payments, the payment amount, and the payment method. Consumers should view BNPL products like any other credit, spend within their limits, set up a repayment plan before making large purchases, and opt for automatic payments to avoid late fees for late payments.
“Whenever possible, try to pay from your checking account rather than a credit card to avoid paying interest on these purchases later, but make sure you always have enough money in your account to cover your monthly payments to avoid overdrafts,” Achieve said.
If you’re looking for another form of credit to finance a big purchase, you could consider taking out a personal loan. Visit Credible to find the best interest rates and lenders for your needs.
High homeowners insurance premiums are scaring off Florida homebuyers, other states face same problem
Do you have a finance-related question but don’t know who to ask? Email a trusted money expert email address: Your question might be answered in Credible’s Money Expert column.
