According to the report, the US Consumer Financial Protection Bureau (CFPB) plan is due to concerns that the rapid growth of financial products of “buy now, pay later” companies such as Klarna and Affirm Holdings may harm consumers.
JOIN XIAOMI ON TELEGRAM
The CFPB does not currently oversee buy now pay later companies or their products, but the agency says they will have guidelines or regulations consistent with those of credit card companies. The CFPB also stated that they will implement appropriate oversight and inspection mechanisms.
The move will be a blow to the entire industry. In fact, such businesses have already come under pressure from higher financing costs and lower U.S. consumer spending due to inflation. It also marks a major offensive by CFPB director Rohit Chopra. He has previously pledged to scrutinize tech-driven companies as they increasingly encroach on the traditional financial industry.
“Banking and commerce in the U.S. are often segregated, but as payments and financial services begin to take the approach of big tech, that segregation could be broken,” he said. With the “buy now, pay later” service, consumers can pay in installments for consumption.
The popularity of such services has surged as U.S. consumers have made heavy use of e-commerce during the pandemic. Merchants pay the provider a fee each time a consumer completes a transaction through the “buy now, pay later” service.
A CFPB investigation last year found that “buy now, pay later” providers Affirm Holdings, Block’s Afterpay, Klarna, PayPal, and Australia’s Zip made 180 million consumer loans in 2021 totaling $24.2 billion.
