Report: CFPB identifies areas BNPL has caused harm to consumers

The buy now, pay later (BNPL) industry grew rapidly during the pandemic, but borrowers may have received uneven disclosures and protections, according to a new CFPB report. Five firms surveyed in the report originated 180 million loans totaling over $24 billion in 2021 — a near tenfold increase from 2019, according to the CFPB.

The report, “Buy Now, Pay Later: Market Trends and Consumer Impacts,” states that, once a niche financial offering that was heavily concentrated in apparel and beauty, BNPL has now branched out to industries as disparate as travel, pet care and even groceries and gas. Apparel and beauty merchants, who had combined to account for 80.1% of originations in 2019, only accounted for 58.6% of originations in 2021, according to the report.

The report also states that marketing of BNPL loans can make them appear to be a zero-risk credit option and identified certain areas of risk of consumer harm, including:

  • inconsistent consumer protections;
  • data harvesting and monetization; and
  • debt accumulation and overextension.

To address potential consumer harms, the CFPB says it intends to identify interpretive guidance or rules to issue with the goal of ensuring that BNPL lenders adhere to baseline protections Congress has established for credit cards. As part of this review, the agency said it will also aim to ensure BNPL lenders, such as credit card companies, are subject to appropriate supervisory examinations.

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