Increasing Late Fees, More Defaults as Buy Now, Pay Later Expands Reach

Convenient product carries risks for consumers

Andy Spears
3 min readSep 19, 2022


Photo by Franki Chamaki on Unsplash

Buy Now, Pay Later — once the convenient way to “pay in four” for beauty and apparel — has expanded its reach into nearly every sector. This includes groceries.

Jason Mikula of Fintech Business Weekly breaks down a recently released report from the Consumer Financial Protection Bureau (CFPB) that details the impact of BNPL products on the market and on consumers.

Here are some key takeaways:

  1. The total dollar amount of loans originated increased 11x from 2019 to 2021. That’s big growth for a relatively new industry and signals BNPL’s popularity with consumers.
  2. The average loan size is relatively small — currently sitting at $135. In a typical “pay in four” arrangement, then, the customer would purchase the product with $33.75 up front and three additional payments (usually two weeks apart). So, over six weeks, a customer would fully pay for their purchase.
  3. Borrowers often use multiple BNPL loans to manage cash flow. The report showed that in the fourth quarter of 2021, 15.5% of users used five or more loans.
  4. Defaults increased by nearly 30% from 2019 to 2021 — still, these defaults only amount to about 4% of all BNPL loans. More than 10% of borrowers had at least one late fee in 2021 — and this rate continues to increase.

The bottom line?

Buy Now, Pay Later is here and here to stay. The income generated is significant, customers are using it (a lot), and it allows merchants to sell more product — which is especially important in an inflationary climate.

That said, there are risks and consumers should understand them. A recent survey showed that 1 in 5 consumers who took out a BNPL loan regretted it after the fact.



Andy Spears

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