Home News CU Trades Point CFPB to Risks of Buy Now, Pay Later Products

CU Trades Point CFPB to Risks of Buy Now, Pay Later Products

CU Trades Point CFPB to Risks of Buy Now, Pay Later Products

Credit union trade organizations, CUNA and NAFCU filed letters with the CFPB Friday asking the bureau to carefully examine and regulate “buy now, pay later” (BPNL) companies.
In December 2021, the CFPB opened an inquiry into five companies offering BPNL products after consumer complaints were filed over the exorbitant interest rates charged for the BPNL purchases. According to the CFPB, these types of point-of-sale installment loans can increase the cost consumers pay up to 30% to 50%.
Since that time, the CFPB issued a request for information on BPNL products and services.
CUNA Senior Director of Advocacy and Counsel for Consumer Protection Alexander Monterrubio wrote, “While credit unions welcome innovation in the market, we are concerned the exponential growth of BNPL products has outpaced prudent regulatory oversight and could ultimately result in consumer harm. In addition, the absence of effective oversight creates an uneven playing field to the material disadvantage of traditional lenders.”
NAFCU Regulatory Affairs Counsel James Akin raised concerns with the CFPB of the potential targeting of BPNL products to lower-income consumers. “Although NAFCU supports increased access to credit, it must be done so in a manner that is safe and cognizant of differences in financial health and ability to repay. NAFCU and its member credit unions have significant concerns regarding BNPL providers’ apparent targeting of low-income or paycheck-to-paycheck consumers as well as the insufficient underwriting that accompanies each loan,” the letter read.
According to NAFCU, Akin also requested the CFPB consider several updates to Regulation Z that would level the playing field in the BNPL market to increase the availability of consumer credit while maintaining consumer protections.
“The addition of more credit unions, with their culture of compliance and consumer protection, to the BNPL market, can only serve to improve the standards and practices of BNPL as a whole,” wrote Akin.
CFPB’s research found consumers spent nearly $100 billion in purchases using BNPL programs in 2021, up from $24 billion in 2020.
With this level of money being spent, CUNA and NAFCU asked the CFPB to step up efforts to better regulate BPNL companies and its products.
“Credit unions and other well-established financial service providers are heavily regulated for safety and soundness and consumer protection regulatory compliance. This is not always the case for companies offering BNPL products,” Monterrubio wrote.

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