21 Attorneys General Say CFPB Should Regulate Buy Now, Pay Later

Last month, the Consumer Financial Protection Bureau (CFPB) closed its request for comments on the Buy Now, Pay Later (BNPL) inquiry it launched on December 16. Among the comments received, 21 state attorneys general (AGs) submitted a letter expressing concern that some BNPL products are designed to skirt around consumer protection laws. 

“We have concerns about new and supposedly innovative financial products that promise to disrupt and democratize the industry but push consumers into cycles of debt and carry some of the same terms and features as other expensive and predatory financial products,” the letter reads. “We are particularly concerned when such products are popular among younger consumers unfamiliar with navigating credit products and consumers who may already be struggling to make ends meet and to cover their existing debt burdens.”

The AGs urged the CFPB to use its rulemaking capabilities to heighten fee transparency, credit reporting, disclosure, dispute resolution mechanisms, and the use of consumer data, as well as to ensure BNPL providers are accurately disclosing all fees. They also recommended assuring that any fees charged are reasonable and proportional to the total loan cost. 

PYMNTS noted that the AGs, along with other commenters, requested BNPL firms to report positive repayment history to credit agencies to help consumers create credit profiles, as well as help BNPL providers assess borrower underwriting risks.

Most of the comment submissions discussed the need to better inform consumers of their choices in BNPL services. Additionally, the AGs talked about the need to conduct more research on exactly how the BNPL market affects consumers. 

“We urge the CFPB to analyze whether and how BNPL providers ensure consumer rights and protections, disclosure of fees, charges, and other essential terms to consumers, as well as how they comply with general requirements to refrain from unfair, deceptive, and abusive acts and practices,” they wrote.

The letter was signed by the Attorneys General of Illinois, California, Colorado, Connecticut, Delaware, Hawaii, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington, as well as the Hawaii Office of Consumer Protection.