Buy now, pay later Plans are popular, but you need to be careful, experts say – NBC 7 San Diego

If you have made purchases online, you may have seen the option of paying for your purchase in installments. These plans are called “Buy Now, Pay Later” and the industry has exploded in popularity. In 2021, millions of loans totaled more than $24 billion, compared to just $2 billion in 2019.

When your budget is tight, this can be a tempting solution. These loans work by giving you a way to pay them back in a matter of weeks or months.

NBC 7 Responds spoke to several people who had used these services before.

“I was buying a bunch of clothes and just didn’t have all the money up front,” Kyla said. “They broke it every few weeks, so it was like micropayments.”

These payment options are offered for everything from electronic devices to concert tickets, and used by tens of millions of people.

A new report from the Consumer Financial Protection Bureau examined five Buy Now, Pay Later companies: Affirm, Afterpay, Klarma, PayPal and Zip.

The CFPB report says there are some benefits, such as a simple reimbursement structure, but there are also some concerns.

These payment plans skip the typical lengthy approval process, but are still loans that require regular payments. The CFPB found that all five companies sent people to collections, which can have a big impact on your credit score.

Several companies also have late fees if you miss payments, but the CFPB says they’re often lower than credit card fees.

However, the office’s biggest concern is overcharging, taking on too many of these small payments, and not paying large bills. Many of the people we spoke to agreed.

“I think people should only spend the money they have,” Annie said. “It’s like spending next month’s salary. You’ll forget about it, like subscriptions.”

The CFPB said the findings could help them create guidelines or rules to protect customers and hold the BNPL industry to similar standards that other lenders are required to meet.

Buy now, pay later Businesses are responding

NBC 7 Contacted each of the companies that provided data to the CFPB for its report. Here are their responses:

To affirm

Since its inception over a decade ago, Affirm has operated on the principles of transparency, putting people first and aligning our interests with those of consumers. Our top priority is to empower consumers by providing a safe, honest and responsible way to pay over time, with no late or hidden fees. This includes underwriting every transaction before extending credit, giving consumers control over their privacy choices, and providing consistent and transparent information at checkout.

Today represents a major step forward for consumers and honest finance, and we are encouraged by the findings of the CFPB following their review. We will continue to engage with all of our stakeholders as we pursue our mission to provide honest financial products that improve lives.

After-paymentreferred NBC 7 to the Financial Technology Association statement which said in part:

The CFPB report indicates that Buy Now Pay Later offers clear benefits to consumers, ranging from reduced costs to a simple reimbursement structure. According to the report, Buy Now Pay Later “imposes significantly lower direct financial costs on consumers than traditional credit products.” The CFPB also found that “BNPL is generally an interest-free product…fees are relatively low in absolute terms and do not accrue like credit card interest”.


CFPB findings show that consumer preference is rapidly shifting from high-interest credit cards to interest-free BNPL, which encourages responsible spending through short-term repayment plans. BNPL’s volumes represent less than 1% of credit card usage in the United States, and BNPL’s total purchase volumes in the United States do not even represent a quarter of credit card fees and interest charged to Americans at $120 billion a year. As a licensed European bank, Klarna is committed to financial well-being and consumer protection through industry innovation and proportionate regulation. Low-cost, low-risk, no-interest products like BNPL should fundamentally not be regulated in the same way as high-cost credit products that rely on consumer fees and revolving debt.


We are delighted that the CFPB has recognized the value that BNPL brings to consumers, including access to credit, ease of use and lower costs, especially in difficult economic times. The CFPB’s observations seem balanced, reasonable and fair. We have no other specific comments at this time.

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