The Consumer Financial Protection Bureau on Thursday sent letters to five ''buy now, pay later'' companies, including PayPal, Afterpay and Zip, seeking information about how they comply with federal lending laws and regulations, Bloomberg Law reports.
''Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately, too,'' CFPB Director Rohit Chopra said in a statement.
''We have ordered Affirm, Afterpay, Klarna, PayPal and Zip to submit information so that we can report to the public about industry practices and risks.''
Buy now, pay later programs experienced a huge spike in use over Black Friday and Cyber Monday, the CFPB said.
Per Bloomberg Law, consumer advocates are concerned about ''loan stacking,'' the practice of getting approval for multiple loans or lines of credit simultaneously within a short period, and consumers losing track of buy now, pay later purchases from different companies.
''Looking at loan stacking and looking at the underwriting requirements could shed some light on what solutions might be,'' Rachel Gittleman, the financial services and membership outreach manager at the Consumer Federation of America, told the news outlet.
Industry groups said they welcomed the inquiry.
''The [Electronic Transactions Association] supports the development of innovative products like BNPL [buy now, pay later] and we look forward to working with the CFPB on discussing how consumers benefit from BNPL,'' Scott Talbott, the ETA’s executive vice president for government relations, said in an email to Bloomberg Law.
Solange Reyner ✉
Solange Reyner is a writer and editor for Newsmax. She has more than 15 years in the journalism industry reporting and covering news, sports and politics.
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