A federal financial protection watchdog says Buy Now Pay Later (BNPL) companies must now offer shoppers credit card-level protection.
After more than two YEAR of market research BNPL, US Consumer Financial Protection Bureau (CFPB) created a new rule on Wednesday that ensures BNPL lenders, including Affirm, Klarna and Afterpay, give Americans essential rights and protections.
Under the new rule, BNPL lenders will have to do three things:
- View payment disputes initiated by customers. While the company investigates the matter, the customer should not continue making payments.
- Credit a refund to the buyer's account If someone returns an item or cancels their order.
- Send billing statements periodically, just like credit card companies do.
These are all protections that customers previously did not have at companies by default, according to CFPB Director Rohit Chopra.
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“When consumers check out and select Buy Now, Pay Later, they don't know if they'll get a refund if they return their product or if the lender will help them if they didn't get what was promised,” Chopra said. in one STATEMENT.
Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB). Photo: Tierney L. Cross/Bloomberg via Getty Images
or 2022 The market report from the CFPB showed that almost 14% of BNPL's purchases from 2019 to 2021 at Affirm, Afterpay, Klarna, PayPal and Zip (formerly Quadpay in the US) involved returns or disputes.
The total dollar value of returns in 2021 at these five firms was $1.8 billion, according to the report.
The regulations “make clear how the agency would apply the longstanding law and regulation to this popular form of credit,” Chopra said.
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Affirm, a BNPL company that more than half of American consumers recognize by name, already stop payments when a customer opens a dispute and SENDS monthly statements, just like other BNPL lenders HOW Klarna.
A Klarna representative said entrepreneur that the CFPB's announcement “is an important step forward in the regulation of BNPL, which Klarna has actively sought for many years.” An Affirm company representative responded with one X threads from CEO Max Levchin, who wrote “clarity and a level playing field from the CFPB = good for consumers and affirmative.”
Clarity and a level playing field from the CFPB = good for consumers and affirmed. The rest of the industry needs to step up to deliver on our promise versus repackaging the same old credit cards in shinier wrappers! 5/5
— Max Levchin (@mlevchin) May 22, 2024
BNPL Global Market was rated to over $250 billion in 2022.