Afterpay Expands from Pay-in-4 BNPL Offerings to Interest-Bearing Loans

Buy Now, Pay Later (BNPL) company Afterpay recently announced that it is adding a monthly payment option at the point of sale for users to choose to stretch payments for certain items for up to a year. It allows users to borrow between $400 and $4,000, which is double the maximum available with its “pay-in-4” loans that are typically repaid in six weeks.

“Afterpay’s new monthly payment option gives shoppers a clear view of what is owed at the time of purchase, and that amount won’t increase over the course of the payment plan,” said Lee Hatton, head of Cash App Asia Pacific, according to American Banker.

The new payment option has no late fees, no compounding interest, and a cap on total interest earned. It also gives users a clear view of the total amount owed at the time of purchase, which will not increase throughout the duration of the payment plan. It will first be offered to existing customers making online purchases, and will be available for in-person purchases next year.

Afterpay’s six-week loans have been popular with consumers since 2018 on lower-cost purchases like cosmetics, clothing, or shoes, but the new loan option could expand the company’s market share with electronics and online furniture retailers.

Nearly 90 percent of Afterpay’s loans are repaid with credit cards, and after missed payments, the customer’s account is blocked from future purchases until payments resume. When loans are 90 days past due, the company usually sends users to a third-party collections firm instead of charging late fees.

Regulators have been intensely scrutinizing BNPL operations, with the Consumer Financial Protection Bureau (CFPB) considering adding “interpretive guidance” to the industry, according to recent remarks by CFPB Director Rohit Chopra.

“I’ve asked our staff to identify potential interpretive guidance or rules to issue with the goal of ensuring that Buy Now, Pay Later firms adhere to many of the baseline protections that Congress has already established for credit cards,” Chopra said.

Those comments came in conjunction with a CFPB report highlighting market trends and consumer impacts within the BNPL industry.