Today’s orders seek to illuminate the range of these consumer credit products and their underlying business practices. The CFPB expects to publish aggregated findings on insights learned from this inquiry. The law requires that the CFPB monitor consumer financial markets and enables the agency to require market players to submit information to inform this monitoring. Big tech companies are also entering the arena. This explosive growth has caught the eye of many investors, including significant venture capital money. More and more Americans are using it, and the most recent Black Friday and Cyber Monday shopping weekend saw massive growth in BNPL. Indeed, BNPL’s use has spiked during the COVID-19 pandemic and throughout the holiday shopping season. Merchants are adopting BNPL programs and are willing to typically pay 3 percent to 6 percent of the purchase price to the companies, similar to credit card interchange fees, because consumers often buy more and spend more with BNPL. Lenders have touted BNPL as a safer alternative to credit card debt, along with its ability to serve consumers with scant or subprime credit histories. The application process is quick, involving relatively little information from the consumer, and the product often comes with no interest. “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.”īuy now, pay later credit is a type of deferred payment option that generally allows the consumer to split a purchase into smaller installments, typically four or less, often with a down payment of 25 percent due at checkout. “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. The CFPB is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology. The orders to collect information on the risks and benefits of these fast-growing loans went to Affirm, Afterpay, Klarna, PayPal, and Zip. Today the Consumer Financial Protection Bureau (CFPB) issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit.
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