Consumer Groups Call for Regulation of Buy Now, Pay Later Products

Groups warn products result in debt trap

Andy Spears


Photo by Phu Dinh on Unsplash

A coalition of consumer groups issued a joint letter to the Consumer Financial Protection Bureau (CFPB) urging action to regulate buy now, pay later products such as AfterPay, Klarna, Affirm, and others.

The groups — including Consumer Federation of America (CFA) and National Consumer Law Center (NCLC) — have expressed alarm at the rapid growth of the largely unregulated consumer credit products. In their letter, the coalition recommends that buy now, pay later products be subject to federal Truth in Lending (TILA) rules and be treated like credit cards.

“BNPL products have largely evaded oversight by federal and state regulators,” the groups stated. “Although these products could have a place in meeting consumer needs if they operate as promised, they pose a risk to consumers and should be covered by basic consumer protections.”

The consumer advocacy groups raised a number of concerns including: a lack of meaningful underwriting for a consumer’s ability to repay, which could lead to unmanageable debt; hidden fees and absence of clear disclosures; problems with disputes and refunds; confusing payment schedules for multiple purchases; deceptive claims about credit building or potentially negative impact on credit reporting; and debt collection issues.

“Marketing of Buy-Now-Pay-Later credit is enticing, with promises of instant approval and no impact on a consumer’s credit,” said the groups. “However, many providers are not conducting meaningful underwriting to assess a borrower’s ability to repay, allowing consumers to accumulate unaffordable amounts of debt.”

The call for regulation from consumer groups comes as a separate survey of consumers indicates that many who use buy now, pay later ultimately regret the decision.

The survey revealed:

More than 45% of Americans have now signed up for at least one Buy



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .