State Attorneys General Press Major BNPL Firms for Lending Details

Seven state attorneys general last week launched a multistate inquiry into leading Buy Now, Pay Later (BNPL) lenders, sending formal inquiries to companies including Affirm, Klarna, PayPal, Afterpay, Sezzle, and Zip. The letters requested detailed disclosures about the companies’ pricing, repayment terms, underwriting standards, and dispute handling processes. The effort, led by attorneys general in California, Connecticut, Illinois, Colorado, Minnesota, North Carolina, and Wisconsin, aims to assess whether BNPL products expose consumers to undue financial risk.

The states noted concerns that BNPL lenders may not be adequately evaluating borrowers’ ability to repay, especially in light of reduced federal oversight. Under the Biden administration, the Consumer Financial Protection Bureau (CFPB) had proposed classifying BNPL as traditional credit under federal law, but regulators rescinded that rule earlier this year.

The letters ask BNPL firms to provide contracts, disclosure statements, details on fees or penalties, credit reporting practices, default and dispute resolution statistics, and metrics on late payments and delinquencies dating back to January 2023. In response, some companies defended their practices. Klarna, for example, said, “we rigorously assess eligibility before purchases, pause use if a payment is missed, and  as a result, over 99 percent of our lending is repaid”. A spokesperson for Affirm voiced support for “thoughtful regulation and consistent industry standards.”

As federal protections for BNPL recede, this latest multistate push could mark the beginning of a more fragmented regulatory landscape, as individual states step in to fill oversight gaps. For BNPL providers, the inquiry signals heightened enforcement risk going into next year, especially if regulators conclude some of the companies’ practices warrant additional oversight or rulemaking.