CFPB Works With Global Regulators to Target BNPL

Citing concerns about the buy now, pay later (BNPL) sector, the Consumer Financial Protection Bureau has ordered five BNPL firms to turn over information about their industry.

The CFPB said Thursday (Dec. 16) it wants to learn more about the risks and benefits of the services offered by Affirm, Afterpay, Klarna, PayPal and Zip.

“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,” CFPB Director Rohit Chopra said in a news release.

“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.”

The bureau says it is concerned specifically with data harvesting, regulatory arbitrage and accumulating debt.

“If a consumer has multiple purchases on multiple schedules with multiple companies, it may be hard to keep track of when payments are scheduled,” the CFPB said.

“And when there is not enough money in a consumer’s bank account, this can potentially result in charges by both the consumer’s bank and the BNPL provider. Because of the ease of getting these loans, consumers can end up spending more than anticipated.”

Read more: BNPL Under Global Regulatory Scrutiny, With UK as Likely Frontrunner

The CFPB’s order comes at a time when the use of BNPL is spiking, drawing the interest of Big Tech companies and venture capital investors.

And as PYMNTS reported last week, a number of countries, including the U.K. and Australia, have launched their own inquiries into the industry. Chopra says his agency will collaborate on these investigations.

The BNPL industry has been largely unregulated in the U.S., as its products fall outside regulators for more traditional credit offerings.

In July, the CFPB published a series of recommendations about potential risks for consumers using BNPL. And last month, the House Committee on Financial Services held a hearing on the risks and benefits of BNPL and urged the CFPB to take a closer look at the industry.