Buy Now, Pay Later? What’s The Catch?

Buy Now, Pay Later? What's The Catch?

( – The Consumer Financial Protection Bureau (CFPB) was created in 2011 to keep an eye on America’s banking institutions and other financial companies to make sure they treat consumers fairly. The agency recently launched an investigation into “buy now, pay later” (BNPL) credit programs.

On December 16, the CFPB issued a press release detailing an inquiry into five online companies offering BNPL credit, including PayPal, Afterpay, Zip, Affirm and Klarna. The newer BNPL programs differ from traditional layaway plans in that consumers receive the product immediately, and assume liability for the debt instantly as well. That fact, along with the nature of internet companies, raised concerns within the CFPB.

As a result, the agency ordered those five companies to provide information regarding the industry’s “practices and risks.” The CFPB’s orders address three concerns:

  1. Data Harvesting: Companies providing BNPL plans have full access to the financial histories of their respective customers. The CFPB raised alarms about the use of “closed-loop shopping apps” by BNPL lenders to bombard customers with targeted advertising.
  2. Arbitrage Compliance: Arbitrage involves the practice of buying and selling products or services in two or more markets to take advantage of differing prices.
  3. Accumulated Debt: The availability of easy-to-use apps and web browser plugins make the accumulation of massive debt a potential trap for some consumers.

The outcome of this investigation could provide guidance and stricter controls for BNPL providers and better protection for consumers. Time will tell. Buyers can visit the CFPB for additional information about its services at

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