What to Know About Buy Now, Pay Later

Consumer Bureau Issues Warning During Busy Shopping Season

The Consumer Financial Protection Bureau (CFPB) has issued a warning about Buy Now, Pay Later (BNPL) loan products even as consumers are in the midst of a key shopping season.

Specifically, the CFPB is advising consumers to be aware of fees and of the fact that BNPL products have fewer protections than credit cards. The Bureau notes:

While many BNPL loans don’t charge interest, most do charge late fees if you don’t make your payments on time. Each BNPL lender has different fees and policies, so it’s important to carefully review the loan’s terms and conditions to understand these fees and what you can do to avoid them.

If you normally make purchases with a credit card, you may be familiar with how to dispute a scam or what to do if your order never arrives or is defective. However, BNPL loans are not subject to some of the consumer protections applicable to credit cards. For example, BNPL loans don’t offer the same dispute protections as credit cards if the item you purchase is faulty or a scam.

The warning about these popular products comes as the CFPB has also opened an inquiry into them in order to determine what consumer protections may be needed going forward.

“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…