September 18, 2021

Volume XI, Number 261

Advertisement

September 17, 2021

Subscribe to Latest Legal News and Analysis

September 16, 2021

Subscribe to Latest Legal News and Analysis

September 15, 2021

Subscribe to Latest Legal News and Analysis

CFPB Blogs About Buy Now Pay Later

On July 6, the CFPB posted a blog titled, “Should you buy now and pay later?” describing how buy now pay later (BNPL) deferred payment options work, and the benefits and risks that come with BNPL.  Generally, if a consumer selects the BNPL option at an online checkout, “the purchase is . . . split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full.”  The CFPB points out that transaction approval takes minutes, with no interest, finance charges, or hard credit inquiries.

The CFPB cautions consumers to consider the following risks before selecting the BNPL purchase option:

  • Because you can qualify for BNPL without passing a hard credit inquiry, make sure you have a good sense of your finances and whether the payments will fit within your budget.

  • Be sure to research whether or not a BNPL company reports to credit bureaus before using their service.

  • BNPL products can carry late fees.

  • BNPL products do not have the same dispute protections as credit cards.

  • Compare BNPL to other payment options that let you repay purchases over a longer time, though some of these loans charge interest and may also charge late fees.

  • For servicemembers, be aware of state and federal resources regarding consumer protections, and submit a complaint to the CFPB for issues with BNPL, or any financial product or service.

Putting it Into Practice:  The timing of this blog post is not surprising as the use of BNPL products has surged during the COVID-19 pandemic.  Noting the sharp increase in the use of BNPL products, the CFPB cited to a recent survey where 42% of American consumers have used BNPL at least once.  The CFPB post comes as the FTC expands the use of the Restore Online Shoppers’ Confidence Act of 2010 (ROSCA) to target online sellers for failing to disclose all material terms and obtain informed consent from consumers before charging them for products and services.  Companies doing business online – whether BNPL or not – would be well-advised to review the CFPB’s and FTC’s guidance to ensure that business practices do not run afoul of regulatory expectations.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 194
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Advertisement
Advertisement
Advertisement