Consumer watchdog to regulate ‘buy now, pay later’ lenders as credit cards

The government’s consumer watchdog took action Wednesday. Categorize popularity Buy now, pay later applications can now be used as credit cards, extending customer protection to millions of users, including the ability to dispute charges and request refunds.

Buy now, pay later programs, also known as BNPL, allow consumers to pay for products in interest-free installments. Companies that offer such services include Affirm, Klarna, and PayPal.

The Consumer Financial Protection Bureau (CFPB) has launched an investigation into BNPL 2021 program Amid concerns about rapid market expansion and rising debt and the use of consumer data.

2022 CFPB market analysis BNPL has exploded during the pandemic, with five companies making 180 million loans in 2021, totaling more than $24 billion, an almost 10x increase from 2019. Ta. According to the report, more than 13% of BNPL transactions involve returns, with consumers disputing or returning $1.8. He has over 1 billion transactions across 5 companies.

“When a consumer checks out and chooses to buy now, pay later, they know whether they can get a refund if they return the product, and how the lender can help them if they don’t get what they were promised. I don’t know if they will give me that,” said 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.”

The CFPB says the move will bring “consistency” to the market. He plans to take effect 60 days after the bill is published in the Federal Register.

Affirm said in a statement that it is “encouraged” by the CFPB’s move to promote “consistent industry standards.”

“We urge other companies offering buy now, pay later products to deliver on our industry promise to provide consumers with more flexible and transparent alternatives to other payment options. I strongly urge you.” It said in a statement.

However, Klarna said, “It is puzzling that the CFPB does not recognize the fundamental difference between BNPL and credit cards.”

“Trying to regulate BNPL like credit cards is like comparing apples to oranges,” Klarna said in a statement, arguing that the new rules will not help consumers reduce credit card debt. did.

Total credit card debt in the U.S. reached $1.13 trillion in the fourth quarter of 2023, the highest balance since at least 2003. Latest Report From the New York Federal Reserve.

But Chopra said BNPL is now a “key part of the consumer credit market” and the rule aims to clarify the laws and regulations governing BNPL.

The agency is accepting comments until August 1st.

“Given the growth in consumer credit balances and the proliferation of new forms of credit, the CFPB will continue to closely monitor these markets and take steps to ensure that consumers are treated fairly,” Chopra said.