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US government plans to regulate ‘buy now, pay later’ consumer loan companies: Report
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.
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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.
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.