“Regulation needed”; The new rules could make Buy Now Pay Later apps work more like credit cards

There are new rules for Buy Now, Pay Later apps that will make them work more like credit cards.

As reported on News Center 7 at 5 p.m. The Consumer Financial Protection Bureau is working to ensure that installment payment options provide the same protections as credit cards.

Buy now, pay later apps like Affirm, Klarna and Afterpay have skyrocketed in popularity.

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“Currently, pay later is not as regulated as credit cards,” said Ted Rossman, senior industry analyst at Bankrate.

But now the Consumer Financial Protection Bureau is working to change that.

They issued a new rule that gives buy now, pay later options the same protection as credit cards.

The new policy includes the right to dispute charges and the right to a refund when the product is returned.

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“Returns are a hassle because there is an intermediary, e.g. sometimes you send an item back to the seller and the Buy Now Pay Later company still asks for a price reduction. And you may not even realize it,” Rossman said.

Bankrate reviewed Buy Now, Pay Later apps and found that more than half of users experienced at least one issue.

“I really think more regulation is needed on several fronts,” Rossman said.

The most common problems include overspending, missing payments and refund issues.

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“Credit reports are another big hole. Most of these plans are not subject to reporting to the credit bureaus. Using it responsibly does not usually help improve your credit score,” Rossman said.

Rossman says there may be some benefits to using these apps, but you should be careful.

“Don’t kick the can down the road with these fortnightly payments. It’s important to have a good plan,” Rossman said.

The new CFPB rule also means that buy now, pay later apps must send you periodic billing statements, like the ones you get with a classic credit card.