Buy-Now-Pay-Later Grew 1,092% in 2 Years

By the Numbers: A Striking Figure in Personal Finance News Today

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Lending grew 1,092% at five major buy-now-pay-later (BNPL) companies between 2019 and 2021, showing why the government is preparing to regulate this increasingly popular category of financial products. 

The volume of lending in BNPL exploded over that two-year period, growing from $2 billion to $24.2 billion among five lenders examined by the Consumer Financial Protection Bureau (CFPB) in a report released Tuesday. While consumers can benefit from BNPL products, they also come with some major risks, and the bureau said it was increasing its supervision of BNPL companies’ practices. 

The upshot for borrowers: In the future, BNPL loans might come with more of the consumer protections that credit cards have. BNPL services offered by companies like Klarna and Afterpay allow customers an alternative way to finance retail purchases, typically spreading the cost over four interest-free payments. But they don’t come with the dispute resolution protections that credit cards are required to offer, so if you need to return merchandise, you might have a harder time than if you’d paid with a card.

Not only that, but BNPL companies have no way of determining what purchases customers are making through other BNPL providers, which increases the risk that people will rack up more debt than they can pay back, the bureau said in its report. Another potential risk for borrowers: providers aggressively collect data on their customers’ shopping habits, which could “threaten consumers’ privacy, security, and autonomy” and concentrate power in the hands of a few tech platforms, the CFPB said. 

“Buy Now, Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards,” CFPB Director Rohit Chopra said in a statement. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan.”

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  1.  Consumer Financial Protection Bureau. “Buy Now, Pay Later: Market Trends and Consumer Impacts,” Page 3.

  2. Consumer Financial Protection Bureau. “Director Chopra’s Prepared Remarks on the Release of the CFPB’s Buy Now, Pay Later Report.”

  3. Consumer Financial Protection Bureau. “CFPB Study Details the Rapid Growth of “Buy Now, Pay Later” Lending.”

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