The Consumer Financial Protection Bureau announced on Wednesday that ‘buy now, pay later’ companies must adhere to many of the same rules required by credit card lenders.
The consumer agency announced a new rule on May 22 that says these companies, which have become increasingly popular in recent years, as previously reported by The Dallas Express, must offer customers the same legal rights and protections that credit card lenders already provide, reported the Associated Press.
Buy now, pay later (BNPL) options are short-term financing solutions that many retailers offer consumers during checkout, as previously reported by The Dallas Express. These solutions enable customers to make an immediate purchase but pay for items in installments over time.
Usually, installments are divided into four payments, with the first due immediately and the remaining three owed every other week.
While these financing solutions are usually marketed as zero-interest or low-interest, they have pushed American debt levels higher. For one, missed payments can result in a fee. Perhaps more importantly, however, putting off the payment has encouraged some Americans to spend more than they otherwise would.
Affirm and Klarna, two of the biggest BNPL companies, say they welcome the rule.
“We are encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, to provide greater choice and transparency for consumers,” Affirm said in a statement.
“We urge other companies that offer buy now, pay later products to live up to the industry’s promise to provide consumers with a more flexible and transparent alternative to other payment options. We are committed to continuing to engage with the CFPB as we constantly improve the experience and value we deliver to consumers, as well as our practices.”
While new rules are a step forward, BNPL companies still do not come under the same scrutiny as credit card providers, which, for example, must report to the major credit bureaus. BNPL companies do not have this same requirement.
The new regulations will improve consumers’ protection when disputes are being investigated, mandate refunds for returned products or canceled services, and require periodic billing statements, according to AP.
The White House called the new regulations a “crackdown on corporate rip-offs,” reported CBS.
“The Biden-Harris Administration will continue to take action to protect consumers and keep more money in Americans’ pockets,” Jon Donenberg, a deputy director with the National Economic Council, said in a statement, per CBS.
