New “Buy now, pay later” rules

The Consumer Financial Protection Bureau announced Wednesday that “buy now, pay later” companies must follow many rules required by credit card lenders.

The consumer agency announced a new regulation on May 22, which states that companies that have become increasingly popular in recent years, as previously reported Dallas Expressmust offer customers the same rights and protections that credit card lenders already provide, the Associated Press reports.

Buy now, pay later (BNPL) options are short-term financial solutions that many retailers offer to consumers during checkout, as previously reported Dallas Express. These solutions enable customers to make an immediate purchase while paying for the goods in installments spread over time.

Typically, installments are divided into four installments, with the first one payable immediately and the remaining three every two weeks.

Although these financing solutions are usually advertised as interest-free or low-interest, they have increased the level of American debt. First, missed payments may result in a fee being charged. But perhaps more importantly, the payment deferral has encouraged some Americans to spend more than they otherwise would have.

Affirm and Klarna, two of the largest BNPL companies, say they welcome the rule.

“We are pleased that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, to provide consumers with greater choice and transparency,” Affirm said in a statement.

“We are calling on other buy now, pay later companies to deliver on the industry’s promise to provide consumers with a more flexible and transparent alternative to other payment options. We are committed to continuing to work with the CFPB as we continue to improve the experiences and value we deliver to consumers, as well as our practices.”

While the new rules are a step forward, BNPL companies are still not subject to the same scrutiny as credit card providers, who, for example, must report to major credit reference agencies. BNPL companies do not have the same requirement.

According to AP, the new rules will improve consumer protections when handling disputes, require refunds for returned products or canceled services, and require periodic billing statements.

The White House called the new regulations “a crackdown on corporate fraud,” CBS reports.

“The Biden-Harris administration will continue to take action to protect consumers and keep more money in Americans’ pockets,” Jon Donenberg, deputy director of the National Economic Council, said in a statement to CBS.