The ability to pay for goods and services over equal installments has made buy now, pay later borrowing a popular way to cover purchases. Whether you’re buying airline tickets or electronics, it’s easier to pay 25% today to get what you need and handle the rest with a few payments later.
BNPL companies such as Affirm, Klarna and Afterpay typically offer easy approvals and interest-free payments that are often used as an alternative to credit cards. But amid BNPL’s rapid growth, the Consumer Financial Protection Bureau identified concerns about issues like inconsistent disclosures, a lack of credit reporting and the risk of consumers overextending themselves by taking out multiple BNPL loans at a time.
The CFPB stepped in to clarify consumer rights and protections for BNPL products. But with the future of the CFPB in question, those protections could be weakened or disappear altogether. Here’s what that means for the future of BNPL, and how you can protect yourself if you’re considering a BNPL loan.
CFPB Oversight of BNPL
In 2024, the CFPB issued an interpretive rule that effectively determined that BNPL lenders are credit card providers. The rule followed a study that identified inconsistent application of disclosures and protections across the BNPL market. With the rule, the CFPB established that BNPL lenders must provide the same consumer protections and rights as credit cards.
“The CFPB’s rule is pretty straightforward,” says Adam Rust, director of financial services at the Consumer Federation of America. “It says BNPL lenders are credit card issuers, their products are a form of a credit card, and they should be held to the same expectations for consumer protections as any other credit card company.”
Therefore, consumers obtaining BNPL loans can:
— Get a standardized cost-of-credit disclosure
— Dispute charges
— Get a refund after returning a product
— Get periodic billing statements
— Not be forced into automatic payments
— Avoid paying multiple late fees on the same missed payment
— Have payments reported to major credit bureaus
“The CFPB has given consumers more protection by classifying BNPL as credit cards,” says Joe Camberato, CEO of National Business Capital, a business financing broker. “This means buyers now have the right to dispute charges, get refunds on returns, and receive account statements. They are now under Regulation Z and the existing Truth in Lending Act. Both of these help outline rules and guidelines, as well as help consumers better understand the terms they’re agreeing to.”
[SEE: Best Credit Cards to Build Credit]
BNPL Regulation Without the CFPB
Without the CFPB, the rule classifying BNPL lenders as credit card providers loses its teeth, and BNPL lenders may no longer be held to the same standards as credit card companies. As other CFPB rules are targeted for rollback, such as limits on bank overdraft fees, the BNPL rule could be as well.
Even if the CFPB’s BNPL rule stays in effect, it may no longer be enforced. The CFPB has been ordered to stop all enforcement activity under the Trump administration. Without enforcement or oversight from the CFPB, BNPL lenders could try to revert to practices that were common before the rule took effect, taking their chances amid a regulatory void.
“CFPB is halted in its boots and we’re all going to pay for it,” says Cathy Lesser Mansfield, senior instructor in law at Case Western Reserve University.
If BNPL lenders no longer have to adhere to the CFPB’s rule, we could see:
— Inconsistent policies that are potentially confusing for consumers
— Less transparency about total costs, fees and repayment terms
— More aggressive lending, potentially leading to overextended credit
— Forced automatic payments
— Unclear payment due dates and payment methods
— More penalty fees, such as paying multiple late fees for the same missed payment
Alex Naughton, CEO of Qlarifi, a real-time BNPL consumer credit database, says losing regulation might spell short-term success and growth for BNPL providers — but consumer trust may erode without protections. He says unsustainable borrowing and loan stacking are pressing concerns, and there are no safeguards in place to mitigate these practices.
State-level regulators and the Federal Trade Commission could still play a role in BNPL protections for consumers, but the absence of specialized CFPB oversight leaves a gap that predatory lenders could exploit.
Camberato says there’s a balance to strike with regulation to weed out bad actors and harmful practices, but not so much that it restricts access to capital. “That ends up hurting the people with less-than-perfect credit the most.”
Navigating BNPL Without CFPB Protection
As consumers face BNPL borrowing without a CFPB safety net, it’s more important than ever to understand what you’re getting into. Use these key steps to protect yourself when considering a BNPL payment plan:
— Carefully read the terms, looking for hidden fees, autopay requirements and details on dispute policies.
— Know the fees, such as interest or late fees charged after a certain period, and understand when they apply.
— Set payment reminders to avoid missing payments.
— Avoid overextending yourself and don’t take out multiple BNPL loans at once.
— Choose BNPL lenders that report to credit bureaus so you can build credit while you make payments.
— Consider alternatives such as 0% interest credit cards, personal loans or layaway options that may offer more protections.
— Avoid making unnecessary purchases with BNPL.
“I believe the CFPB will survive, but if the interpretive rule is withdrawn or weakened, it will reopen a loophole that has given BNPL a free pass from the rules that apply to their competitors,” says Rust, “and customers will be worse off as a result.”
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What Buy Now, Pay Later Looks Like Without the CFPB originally appeared on usnews.com
