The party may be over for “buy now, pay later.”
The Consumer Financial Protection Bureau said Thursday that these installment payments come with “several areas of risk of consumer harm,” including data harvesting, debt accumulation and “loan stacking” — or juggling multiple payment plans at once.
Buy now, pay later lenders — including companies such as Affirm, Afterpay, Klarna, PayPal and Zip — also “do not offer protections that are standard elsewhere,” according to the consumer watchdog’s report.
“Buy Now, Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards,” CFPB Director Rohit Chopra said in a statement. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan.”
Marshall Lux, a fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, called the government’s findings “very encouraging.”
“It was certainly a call out to non-banks that it’s going to be tougher going forward,” Lux said. The “good news is they will be regulated,” he added.