Enhancing Consumer Protection for Buy Now, Pay Later Loans

Regulator issues guidance to protect consumers

A key federal regulator has issued guidance designed to protect consumers using Buy Now, Pay Later products.

The Consumer Financial Protection Bureau earlier this year extended key credit card protections to Buy Now, Pay Later loans.

Now, they have issued guidance that explains what these protections mean in the financial marketplace.

Consumer advocates applauded the additional consumer protections:

“The CFPB’s new rule will help ensure consumers who use BNPL credit can dispute charges and get their money back promptly just as they are guaranteed by law when they use a credit card,” said Jennifer Chien, senior policy counsel at Consumer Reports.

The guidance is meant to clarify for buy now, pay later providers what consumer protections are required. Essentially, the guidance says that the protections extended to credit card users also apply to buy now, pay later loan users. These include disclosures of fees and any interest rate, repayment terms, late fee terms (both amount and when the fee is assessed), and methods of disputing charges and obtaining refunds.

Prior to the rule extending credit card protections, consumers had to rely on buy now, pay later providers to offer any protections on purchases. Now, those protections are expected to be uniform no matter the provider of the buy now, pay later loan.

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