Since the beginning of the pandemic, as consumers who were furloughed or laid off tried to make ends meet, many turned to “Buy Now, Pay Later” (BNPL) as a means to finance online purchases. While employment has rebounded, online shoppers are still using BNPL during the holidays to pay for gifts in installments. As is the case with any new financial instrument, regulators are slow in catching up.
But the Consumer Financial Protection Bureau (CFPB) in the U.S. has turned its attention to providers in the space. The CFPB this week ordered the biggest players in the BNPL space—Affirm, Afterpay, Klarna, PayPal and Zip—for information that could lead to possible restrictions or obligations for providers of the payment method and merchants that offer it to their online customers.
“Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too,” said CFPB Director Rohit Chopra. “We have ordered Affirm, Afterpay, Klarna, PayPal, and Zip to submit information so that we can report to the public about industry practices and risks.”
The CFPB said it is concerned with how easy it is to accumulate debt using BNPL, what existing regulations may apply to BNPL that providers are not currently adhering to, and how any data that is collected is being used.