A Word of Caution on Buy Now, Pay Later

 From NewsBreak:

The U.S. Public Interest Research Group (U.S. PIRG) issued a report analyzing complaints made to the Consumer Financial Protection Bureau (CFPB) on Buy Now, Pay Later products. The report contained key findings that create cause for concern around these products.

In a press release, PIRG warned of the hazards of using such products - offered by companies such as AfterPay, Sezzle, Klarna, Affirm, and others.

“There’s no such thing as a free lunch. Or free airline tickets. Or free appliances. But it isn’t hard to get the latter two with no money down these days with the proliferation of ‘Buy Now, Pay Later’ plans,” said Ed Mierzwinski, the senior director of U.S. PIRG Education Fund’s consumer program. “Many of these installment plans, often advertised as ‘free’ to the consumer if all payments are made on time, aren’t run by the company you buy your furniture or electronics from. Instead, they’re managed by third-party financial firms -- known as fintechs -- and some claim they aren’t subject to credit card consumer protections.” 

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More on the Risks of Buy Now, Pay Later

 From NewsBreak:

The Consumer Financial Protection Bureau (CFPB) has announced an inquiry into the practices of the Buy Now, Pay Later (BNPL) industry in light of the popularity of products such as Klarna and Afterpay. The move comes as the major credit bureaus are adding information from Buy Now, Pay Later to credit reports.

Use of BNPL has seen astronomical growth. Companies like Affirm, Afterpay, Klarna, PayPal, and Zip (formerly Quadpay) have become almost ubiquitous in the retail market since the pandemic. This past holiday season, usage spiked even higher, especially among young people.

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Buy Now, Pay Later and Your Credit Report

 From NewsBreak:

American Banker reports that the major credit bureaus are adding designations for Buy Now, Pay Later (BNPL) products such as AfterPay and Klarna.

Beginning in the next few weeks, Equifax will add a business industry code for BNPL to classify data such as payment history, a move that will make BNPL loans visible on credit reports. Equifax says this will provide clients and scoring partners the ability to decide how to include BNPL payments into their own decision making for new financial services. At the same time, TransUnion is working on its own BNPL credit reporting service.

MORE on how including Buy Now, Pay Later will impact your credit score. 

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A Warning for Holiday Shoppers

 From NewsBreak:

“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,” said CFPB Director Rohit Chopra. “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.”

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Beware Buy Now, Pay Later Products

 From NewsBreak:

“While the emergence of BNPL as affordable small-dollar credit has potentially provided an alternative to more costly forms of credit, these products also have the potential to cause consumer harm. Many BNPL providers structure these products in an effort to avoid certain consumer protection obligations under the Truth in Lending Act or the Military Lending Act, which generally apply to loans that are repayable in more than four installments or are subject to a finance charge. BNPL products generally do not receive all of the protections credit cards have, including those governing ability-to-repay, monthly statements, reasonable and proportional penalty fees, and the ability to raise merchant-related disputes.

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