Buy now, pay later companies must comply with credit card standards, consumer agency says

NEW YORK (AP) — Buy ​​now, pay later companies must offer consumers the same legal rights and protections as credit card lenders, the Consumer Financial Protection Bureau said Wednesday in a new rule.

This includes the right to request a refund and dispute a transaction. The agency said it began an investigation into the short-term loan industry two years ago and issued the rule in response to ongoing consumer complaints.

Here's what you need to know.

What's behind the new regulations?

Buy now, pay later loan usually sold in the market Zero or low interest rates and allow consumers to pay in installments over weeks or months. They are promoted as a way to purchase expensive products and services over time, and the service is often offered at checkout for online purchases. It is typically used for larger items such as furniture, clothing, and airline tickets.

in a ReportThe CFPB found that more than 13% of “buy now, pay later” transactions involved returns or disputes, and in 2021, people disputed or returned $1.8 billion in transactions at the five companies surveyed.

“Whether shoppers swipe a credit card or use buy now, pay later, they are entitled to important consumer protections under longstanding laws and regulations,” CFPB Director Rohit Chopra said in a statement.

How has the industry reacted to this provision?

Two major buy now, pay later players – Affirm and Klarna – said they welcomed the rule.

“We are encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, providing consumers with more choice and transparency,” a spokesperson for the company said in a statement. , Affirm currently offers “dispute and error resolution assistance.”

A Klarna spokesman said the company had also investigated the consumer dispute and paid the associated refund.

In a statement, Klarna said the agency's announcement was a “significant step” in regulating the buy now, pay later industry. It said it had been calling for regulatory oversight “for years”.

Although some in the industry voluntarily choose to operate under the standards set forth by the CFPB's new rules, there are still significant differences between credit card loans and buy now, pay later loans. For example, buy now, pay later lenders do not all report their loans to the three major credit bureaus. Some analysts said this Can guide consumers Overextend or take on more debt than it can manage or afford.

What rights do consumers have?

The CFPB says buy now, pay later lenders need to extend many of the same rights and protections as traditional credit card providers. “Importantly, these cover disputes and refund rights,” the agency said.

The agency clarified that under the new buy now, pay later rules, lenders must:

– Investigate disputes. Lenders also must suspend payment requirements during the investigation and sometimes must extend credit.

— Refunds for returned products or canceled services. Buy now, pay later lenders must credit the refund to the consumer's account.

— Provide bills. Consumers must receive periodic balance statements similar to those received for traditional credit card accounts.

“Failure to provide dispute protection could create confusion for consumers when they return goods or experience other billing difficulties,” the CFPB said.


The Associated Press receives support from the Charles Schwab Foundation to produce educational and explanatory reporting that promotes financial literacy. The independent foundation is independent of Charles Schwab Corporation.

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