What Do the New Buy Now Pay Later Regulations Mean for Your Efforts to Get Out of Debt?

Is buy now pay later (BNPL) a financially sound choice for people who want to avoid racking up interest charges and credit card debt?  Is it subprime lending that consumers choose because they do not have access to more affordable and less risky forms of credit?  It is both.  As with so many other financial products, online platforms, and social phenomena, BNPL became available, people used it enough for regulators to notice, and then regulators started thinking about which rules are necessary to prevent the most dangerous or exploitative practices.  The Consumer Financial Protection Bureau (CFPB) issued new regulations this year for BNPL services.  These rules require BNPL companies to offer customers the same protections that credit card account holders get, but they do not address the biggest risks associated with BNPL lending.  If you are struggling with BNPL debt, contact a Philadelphia debt relief lawyer.

BNPL Services Must Offer the Same Protections as Credit Cards

The new regulations issued by the CFPB aim to prevent customers’ money from disappearing into the ether; in other words, BNPL cannot charge customers money for products they do not own.  For example, BNPL must stop charging customers’ accounts when they cancel a subscription, and it must refund their money if they return a product that they bought with BNPL.  It must also enable them to dispute charges on their account if customers believe that the charges are fraudulent, and customers are not responsible for paying while the dispute is pending.  These are the same standards to which credit card companies must adhere.  The good news is that the leading BNPL companies already offer these features.

The New Regulations Enable BNPL to Continue to Be a Silent Killer of Your Finances

The new CFPB regulations fail to address the biggest dangers of BNPL.  First, BNPL debt can quickly become unaffordable, because most BNPL companies do not perform credit checks as a prerequisite for entering an installment payment agreement.  Therefore, if you buy your groceries with BNPL for several consecutive weeks, soon you owe installment payments on all of them, and if you can’t pay, the late fees start piling up.  Perhaps even worse for low-income consumers, BNPL does not report your payments to the credit reporting bureaus when you do make your payments on time.  If they did, BNPL would be an affordable way for consumers to build their credit history.  BNPL’s lack of effect on your credit score means that you can easily make purchases you can’t afford, and it also means that you do not get rewarded for using BNPL responsibly.

Contact CONSUMERLAWPA.com About Staying Out of Trouble With BNPL Debt

A Philadelphia consumer law attorney can help you find a strategy for repaying or discharging your BNPL debt and for building your credit history if you do not qualify for a conventional credit card.  Contact CONSUMERLAWPA.com to set up a free, confidential consultation.

Source:

cnbc.com/2024/06/03/cfpbs-bnpl-regulation-doesnt-go-far-enough-harvard-fellow-says.html