The Consumer Financial Protection Bureau (CFPB) issued a statement saying it will not prioritize enforcement actions related to buy now, pay later loans.
Specifically, it will not prioritize enforcement actions taken on the basis of the Truth in Lending regulation called Use of Digital User Accounts to Access Buy Now, Pay Later Loans.
Instead, the bureau will keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans. In addition, CFPB officials said the bureau is contemplating taking appropriate action to rescind Buy Now, Pay Later.
Buy now, pay later, often called BNPL, is a relatively new service provided by payment providers that allows consumers to make installment payments for items purchased. The payments are made using an app at checkout and the installment payment amounts are determined instantaneously, often without interest or fees.
Some of the leading BNPL providers are Affirm, Afterpay, Klarna, and PayPal, and the major credit card companies also have their own BNPL options.
The CFPB instituted a rule last year that said BNPL lenders are credit card providers. Accordingly, buy now, pay later lenders must provide consumers with some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a buy now, pay later loan.
A recent survey from Bankrate found that about 30 percent of Americans have used a BNPL service at checkout. The usage rates were pretty similar across household income brackets.
The survey revealed that about 49 percent of users say they experienced at least one problem while using a BNPL service. Among the most common problems are overspending (24 percent), missing payments (16 percent) and regretting a purchase (15 percent). Also, Gen Zers had the most issues, as 66 percent of that cohort reported experiencing at least one issue while using BNPL.
Further, 57 percent of users said they chose this payment method to stretch their cash flow — more than any other reason. The second reason was the appeal of low/no interest rates came in second at 40 percent.
PayPal was the most popular, according to the survey, used by 15 percent, followed by Affirm at 11 percent. Afterpay and Klarna were each at 9 percent.