December 18, 2023

During Holiday Season, Brown, Warnock, Fetterman Urge CFPB to Ensure Consumers Do Not Struggle with ‘Buy Now, Pay Later’ Debt

WASHINGTON, D.C. – Today, U.S. Senators Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, Raphael Warnock (D-GA), and John Fetterman (D-PA) urged Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra to monitor the risks posed by “buy now, pay later” (BNPL) products which let consumers pay off certain purchases over several weeks. In a letter to Chopra, the Senators urged the Director to monitor BNPL products as consumers significantly increase their use during the holiday season. The letter comes after Director Chopra mentioned that the CFPB is monitoring BNPL products at a Banking, Housing and Urban Affairs Committee hearing last month. 

“While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season…. The CFPB must ensure that BNPL does not become a method to take advantage of struggling consumers,” the Senators wrote.

Senator Brown has previously urged the CFPB to strengthen oversight of BNPL products and hosted consumers for a listening session about their experiences with new financial products, including BNPL.

You can read the full letter here and below: 

Dear Director Chopra: 

At the Senate Banking Committee’s semi-annual Consumer Financial Protection Bureau (CFPB) oversight hearing last month, you noted that you were monitoring “buy now, pay later” (BNPL) products. We urge you to continue focusing on this increasingly popular form of consumer credit and use the full range of your authority to ensure that it is not used to prey upon consumers. While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season. 

A typical BNPL loan allows a consumer to split the cost of a purchase across four installments, repayable every two weeks. BNPL is typically used for online purchases in the range of $50 to $1,000. If all goes well for the consumer and they can meet all installments, BNPL usually incurs no interest and no fees. However, BNPL may be structured to encourage consumers to purchase more and take on more debt. Unfortunately, consumers can overextend their finances in a short period of time, making the BNPL debt unmanageable.

This year, as the holiday season progresses, the use of BNPL has surged. In November 2023, consumers used BNPL credit to spend $8.3 billion online, an increase of 17 percent from the same period in 2022. At the same time, reports indicate that American households savings are down and many of them are struggling to repay elevated credit card, auto, and other debts. The increased use of BNPL and the debt burden being carried by the typical holiday BNPL customer make it all the more important that consumers are protected during the holiday season, whether they finance their holiday shopping using a credit card or BNPL loan.

These trends should make us cautious about BNPL use. Research suggests that BNPL tends to be used among people with lower incomes, lower credit scores, and higher rates of delinquency on other debt. These are Americans who can least afford the potentially harmful aspects of BNPL, such as forced autopay, shoddy dispute resolution practices, negative information in their credit reports, and late fees. The CFPB must ensure that BNPL does not become a method to take advantage of struggling consumers.  

We are concerned that, after the holiday season is over and the bill comes due, consumers will continue struggling with BNPL products. I appreciate your longstanding attentiveness to this issue, and I urge you to use your full regulatory and supervisory authority to protect Americans against any potential harms.  

Sincerely,   

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