Buy now, pay later, services may be receiving more scrutiny if several Senate Democrats have their way.
Yesterday, Senators Jack Reed, Sherrod Brown, Elizabeth Warren, Chris Van Hollen, Tina Smith, and Jon Ossoff, sent a letter to the Consumer Financial Protection Bureau (CFPB) urging Director Rohit Chopra to take action regarding BNPL services.
BNPL platforms have emerged as a popular alternative to expensive credit cards when purchasing online or at a retailer. Typically, a consumer is given an option to pay for an item over time versus payment in full. Sometimes, the option to pay over time is without any additional fees.
The letter to Chopra states these “interest-free, small-dollar installment loans have proven appealing to consumers, but can cause consumer harm.”
The letter claims that BNPL providers are structuring products to avoid requirements under the “Truth in Lending Act or the Military Lending Act, including obligations to raise disputes or reasonable penalties fees.
The Democrats say that BNPL providers do not operate with meaningful oversight as they are “not generally subject to federal supervision.” A “lack of standardized disclosures” means there is a potential for hidden fees.
The letter also claims that BNPL credit does not “engage in rigorous underwriting practices.”
The letter is available here.
The Senators stated that they “respectfully request that you review BNPL products as soon as practicable and take action under the CFPB’s existing authorities to protect consumers. We appreciate your attention to this critical matter, and look forward to your prompt reply.”