BNPL Growth Draws Scrutiny from CFPB

The US Consumer Financial Protection Bureau (CFPB) requested information from prominent BNPL (buy-now-pay-later) providers concerning debt buildup, regulatory arbitrage, and data harvesting methods due to the growing popularity of BNPL alternatives at checkout. Orders issued by CFPB on Dec. 16, 2021, demand information on delayed payment choices at the time of purchase, according to Rohit Chopra, head of the CFPB.

"We have ordered Affirm, Afterpay, Klarna, PayPal, and Zip to submit information so that we can report to the public about industry practices and risks," he said.

Chopra pointed out that BNPL often enables customers to pay a 25% down payment at checkout and split the balance of their purchases into low-interest installment plans. Consumers with limited credit histories and subprime credit can qualify for BNPL because to quick approvals and minimal entry hurdles, he added.

"The range of BNPL products provides value to consumers, and ETA members are committed to offering BNPL and other innovative products to benefit consumers," said Scott Talbott, senior vice president, government relations at the Electronic Transactions Association.

​"The BNPL product has seen growth internationally, and many other countries are also taking a close examination of its providers," the CFPB wrote in its Dec. 16, 2021, statement. "As part of today's inquiry, the Bureau is working with its international partners in Australia, Sweden, Germany and the UK, specifically the Financial Conduct Authority. The Bureau will also be coordinating with the rest of the Federal Reserve System, as well as its state partners."

Fazzaco believes that as CFPB imposes stricter scrutiny over BNPL, global payment businesses will be inevitably affected to an extent. As a crucial part of forex trading, it is worth noting that all brokers shall attach importance to possible future changes to payment policies.