CFPB Requests Information on “Buy Now, Pay Later” Credit from Five Companies

The CFPB recently requested information from five companies offering “buy now, pay later” (BNPL) credit.  The CFPB issued orders to collect information on the risks and benefits of BNPL loans.  The CFPB is concerned with accumulating consumer debt, regulatory arbitrage, and data harvesting associated with BNPL credit practices.

BNPL is a type of deferred payment option that allows the consumer to make smaller installment payments, typically four or less, often with a down payment of 25 percent due at the point of sale.  BNPL has been touted as a safer alternative to credit card debt because the product often comes with no interest.  BNPL has the ability to serve consumers with poor or little credit history.

The CFPB is collecting information about BNPL practices because it is concerned about accumulating consumer debt.  The CFPB is specifically concerned that consumers will become regular users of BNPL for everyday discretionary buying and, therefore, end up spending more than anticipated.

The CFPB also expressed concerns that companies are not adequately evaluating which consumer protection laws apply to these products.  For instance, many BNPL companies do not provide dispute resolution protections available to users of other forms of credit, and these companies may also assess different late fees and policies.

Finally, the CFPB is concerned that BNPL companies are collecting and selling consumer data to partner merchants, who, in turn, push specific brands and products.  The CFPB is seeking to better understand the practices around data collection, behavioral targeting, data monetization, and the risks they may create for consumers.