FTC Issues Guidance for “Buy Now, Pay Later” Plans

The Federal Trade Commission recently issued guidance for companies offering plans known as Buy Now, Pay Later (BNPL). These plans typically allow consumers to pay for purchases over a period of several weeks, generally in equal installments. The FTC Act governs these plans and applies to businesses across the BNPL ecosystem, including retailers, companies, marketers, and collectors.

In its recent guidance, the FTC laid out three key principles. First, the FTC reminded companies that claims about a BNPL plan must be true for the typical consumer. The FTC has taken action against companies and retailers who have made claims that are true only for a subset of people. The FTC offered the example of a company who markets a payment plan as “zero cost” but, in fact, charges fees to the typical customer.

Second, the FTC warned against hiding or obscuring material information from consumers. The FTC specifically mentioned deceptive tactics such as requiring users to navigate a maze of screens, using non-descript dropdowns or small icons, or burying information in dense Terms of Service documents. The FTC indicated that these tactics are often motivated by an effort to “convert” consumers into customers but distort consumer understanding.

Third, the FTC reminded companies about the possibility of liability, even when multiple actors are involved. Any company that made misleading claims as well as anyone involved in harming consumers could be liable under the FTC Act. For example, when a customer returns a product through a BNPL plan, both the retailer and the BNPL company may be held liable for prolonged delays in refunding the customer.