Regulators are playing catch up with the burgeoning “buy now, pay later” business as providers of point-of-sale loans are now required to offer the same protections as credit card users. The Consumer Financial Protection Bureau announced on Wednesday that customers will now have the right to dispute charges and demand refunds for returned purchases.
The White House praised the move as part of a broader crackdown on corporate rip-offs, with Jon Donenberg from President Biden’s National Economic Council stating that the administration will continue to take action to protect consumers.
The surge in usage of buy now, pay later loans during the pandemic has led to the need for increased oversight. The loans, which allow borrowers to pay over time in installments, have become a popular interest-free way to make purchases ranging from clothing to travel.
The new rules require BNPL lenders to investigate disputes, refund returned products, and provide periodic billing statements similar to traditional credit cards. While the industry will face tighter government oversight, there is no requirement for lenders to verify borrowers’ ability to repay the loans.
Consumer advocates have expressed concerns about the lack of transparency in the industry, particularly for younger consumers who may not fully understand the terms of their loans. Despite the risks of piling on debt, the popularity of buy now, pay later options continues to grow, with the industry’s five biggest players generating $24 billion in loans in 2021.
As the industry evolves, concerns about transparency and consumer protection remain at the forefront, with companies like Apple taking steps to report loans to credit bureaus. The new regulations aim to balance the convenience of buy now, pay later options with the need for consumer protections in an increasingly digital shopping landscape.
