Now Applying Credit Card Protections: Buy Now, Pay Later

The U.S. Consumer Financial Protection Bureau (CFPB) has implemented a new rule that will require Buy Now, Pay Later (BNPL) companies to provide shoppers with credit card-level protections. This decision comes after more than two years of studying the BNPL market, and aims to ensure that Americans have essential rights and safeguards when using these services.

Under the new rule, BNPL lenders such as Affirm, Klarna, and Afterpay will now be required to investigate payment disputes initiated by customers. During the investigation process, customers will not have to continue making payments. Additionally, if a shopper returns an item or cancels their order, the BNPL lender must credit the refund back to the customer’s account. Furthermore, BNPL companies will now be obligated to send billing statements periodically, similar to how credit card companies operate.

CFPB director Rohit Chopra emphasized that these protections were previously not guaranteed across all BNPL companies by default. The new regulations aim to provide clarity and a level playing field for consumers using BNPL services.

A recent market report from the CFPB revealed that nearly 14% of BNPL purchases made between 2019 and 2021 involved returns or disputes, totaling $1.8 billion in returns in 2021 alone. The global BNPL market was valued at over $250 billion in 2022, highlighting the significant impact of these services on the economy.

Overall, the new rule from the CFPB represents a significant step forward in regulating the BNPL industry and ensuring that consumers are protected when using these popular payment options.