A group of six US senators recently urged federal regulators to step up oversight of âbuy now, pay laterâ (BNPL) installment loan providers.
BNPL products allow consumers to split the cost of their purchases with installments over several months, often. They are often uninteresting.
US Sens. Jack Reed (D-RI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Tina Smith (D-MN) and Jon Ossoff (D-GA) said that these BNPLs can play an important role if the services are transparent, accountable and supervised to comply with federal consumer protection laws.
However, they say some of these products can include hidden fees, create a negative history in a consumer’s credit report, and encourage consumers to rack up debt they can’t afford. They expressed their concerns in a letter to Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB).
âWhile the emergence of BNPL as affordable credit for small dollars has potentially provided an alternative to more expensive forms of credit, these products also have the potential to harm consumers. Many BNPL providers structure these products to avoid certain consumer protection obligations under the Truth in Lending Act or the Military Lending Act, which generally apply to loans repayable in more than four installments or submitted. at financial expense. the senators wrote.
They added that BNPL products generally do not benefit from most of the protections that credit cards enjoy, including those governing repayment capacity, monthly statements, reasonable and proportional penalty fees, and the ability to raise related disputes. to traders.
âIn addition, BNPL non-bank providers currently operate without significant oversight. They are generally not subject to federal oversight which may detect unfair, deceptive or abusive practices or other violations of federal consumer protection laws. Consumers may be unaware of these regulatory loopholes and may be led to mistakenly believe that credit obtained from a BNPL provider has similar protections to credit cards. This regulatory loophole has troubling implications, âSenators said.
Senators called on CFPB to conduct a review of BNPL products and take any action to improve oversight if necessary.