Last week, the Consumer Financial Protection Bureau announcement that he published a series of orders to five companies that offer âbuy now, pay laterâ credits to consumers, prompting them to provide the agency with information about their loan programs. Orders have been issued to Affirm, Afterpay, Klarna, PayPal and Zip. The CFPB said it issued the orders because it was concerned about debt build-up, regulatory arbitrage and data collection in a changing consumer credit market.
As part of the announcement, CFPB Director Rohit Chopra said: âBuy 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 also gets the debt immediately. “
After collecting the information from these companies, the CFPB plans to publish aggregate findings sharing what it learned from the survey, in order to “shed light on the range of these consumer credit products and their business practices under -jacent “.
The survey focuses on three key areas.
First, the CFPB is concerned with how consumers accumulate debts. The CFPB explained that while the old-fashioned layaway installment loans were typically used for occasional large purchases, consumers can now become regular users of âbuy now, pay laterâ programs. The CFPB said: “Due to the ease of obtaining these loans, consumers may end up spending more than expected.” The CFPB also expressed concern that it might be difficult for consumers to know when payments are due on multiple loans and that, if they cannot afford the payments, they could end up paying debts. additional charges from both the consumer’s bank and the credit provider.
Second, the CFPB is concerned that some “buy now, pay later” credit companies may engage in regulatory arbitration – in other words, that they may not adequately assess the consumer protection laws that apply to their products. The CFPB said some of the credit offered may not provide the required information or simply not offer the protections available to consumers if they made the purchase with a credit card.
Finally, the CFPB is also examining the data collection practices of companies. Concretely, the CFPB wishes to understand the practices of companies in terms of data collection, behavioral targeting and data monetization, in order to assess the risks that data gathering can create for consumers.
Merchants often offer consumers the option of purchasing products on credit through third party credit providers. With CFPB taking a close look at their practices, now is the time for marketers to also examine how these credit offers are presented on their sites, to ensure that they are presented in accordance with applicable credit laws. credit advertising and that they are otherwise not presented in a misleading manner.
âBuy now, pay later is the new take on the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but also gets the debt immediatelyâ – Rohit Chopra, Director, CFPB