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The Consumer Financial Protection Bureau said Thursday it is opening an inquiry into popular “buy now, pay later” programs.
The financial watchdog said it is particularly concerned about how BNPL impacts consumer debt accumulation, as well as what consumer protection laws apply and how the payment providers harvest data.
“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 statement.
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“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 findings from this inquiry will be published later, the CFPB said.
Installment payments have taken off along with a surge in online shopping during the Covid pandemic.
This year’s Black Friday and Cyber Monday shopping weekend “saw massive growth in BNPL,” the CFPB said, bringing much more attention to the increasingly popular method of payment.
However, installment buying could encourage consumers to spend more than they can afford and juggling multiple payment plans can be harder to keep track of, the CFPB said.
Further, the agency would like to better understand practices around data collection and what consumer protection laws should apply, it said.