Sens. Brown, Warnock, and Fetterman Send Letter to CFPB on Holiday BNPL Spending
This week, U.S. Senators Sherrod Brown (D-Ohio), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, joined by Sens. Raphael Warnock (D-Ga.) and John Fetterman (D-Pa.), sent a letter to CFPB Director Rohit Chopra urging him to monitor risks surrounding buy now, pay later (BNPL) products as usage significantly rises during the holiday season.
“While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season,” the Senators wrote in a letter to Chopra. “The CFPB must ensure that BNPL does not become a method to take advantage of struggling consumers.”
At a Banking, Housing, and Urban Affairs Committee hearing in November, Chopra mentioned that the CFPB would be closely monitoring BNPL products for potential risks. Senator Brown has urged the CFPB in the past to tighten oversight of BNPL products, and has hosted consumers for a listening session about their experiences with financial products, which included BNPL.
Typical BNPL loans allow consumers to split the cost of a purchase into four payments every two weeks, and is usually used for online purchases ranging from $50 to $1,000. While BNPL doesn’t typically incur interest when all goes to plan, critics say that many BNPL products are designed to encourage consumers to make more purchases, take on more debt, and overextend their finances.
Last month, consumers used BNPL credit to spend $8.3 billion online, up 17 percent from November 2022. BNPL usage tends to be among consumers with lower credit scores, lower incomes, and higher delinquency rates on other debt.
“These are Americans who can least afford the potentially harmful aspects of BNPL, such as forced autopay, shoddy dispute resolution practices, negative information in their credit reports, and late fees,” the Senators wrote.
