U.S. Sens. Sherrod Brown (D-OH), Raphael Warnock (D-GA), and John Fetterman (D-PA) are encouraging Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra to monitor the risks posed by “buy now, pay later” (BNPL) products.
BNPL products allow consumers to pay off certain purchases over several weeks. The senators, in a letter to Chopra, urged him to monitor BNPL product usage, especially during the holiday season.
“While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season,” they wrote to Chopra.
A typical BNPL loan allows consumers to split the cost of a purchase across four installments, payable every two weeks.
“If all goes well for the consumer and they can meet all installments, BNPL usually incurs no interest and no fees. However, BNPL may be structured to encourage consumers to purchase more and take on more debt. Unfortunately, consumers can overextend their finances in a short period of time, making the BNPL debt unmanageable,” they added.
The senators said the use of BNPL has surged this holiday season.
“In November 2023, consumers used BNPL credit to spend $8.3 billion online, an increase of 17 percent from the same period in 2022. At the same time, reports indicate that American households savings are down and many of them are struggling to repay elevated credit card, auto, and other debts. The increased use of BNPL and the debt burden being carried by the typical holiday BNPL customer make it all the more important that consumers are protected during the holiday season, whether they finance their holiday shopping using a credit card or BNPL loan,” they continued.
The senators implored the CFPB to ensure that BNPL does not become a method to take advantage of struggling consumers.