The service, often used for big-ticket items like furniture, clothes and airline tickets, must now follow consumer protection rules.
The Consumer Financial Protection Bureau said Wednesday in a new rule that buy now, pay later companies must provide consumers with the same legal rights and protections as credit card lenders.
In a report, the CFPB found that more than 13% of buy now, pay later transactions involved a return or dispute, and, in 2021, people disputed or returned $1.8 billion in transactions at the five companies surveyed. “We are encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, to provide greater choice and transparency for consumers,” a company spokesperson said in a statement. Affirm currently offers “dispute and error resolution assistance,” the spokesman added.
While some in the industry have voluntarily chosen to operate at the standard now mandated by the CFPB's new rule, there remain significant differences between credit card lending and buy now, pay later loans. For instance, buy now, pay later lenders do not all report their loans to the three major credit bureaus. Some analysts have said this can lead consumers to overextend themselves or take on more debt than they can manage or afford.
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