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willing to pay the higher fees because consumers typically
Insider’sreport spend more when using BNPL.

on payments BNPL seems to have appeal for large-dollar purchases,
like furniture and home goods, home fitness equipment,
electronics and travel. McKinsey reported that the average
BNPL ticket is close to $800. Average loan tenures are eight
Scrutinizing big The CFPB said it is particularly concerned about how fast
or nine months, McKinsey noted.

tech in consumer consumers using BNPL products are accumulating debt,
and potentially overextending themselves. It also said it's
concerned about how BNPL providers harvest data about
payments customers. It asked the five companies—Affirm, Afterpay
(which is being acquired by Block, nee Square), Klarna,

By Patti Murphy PayPal and Zip—to respond in writing to its concerns.
ProScribes Inc. BNPL has been picking up steam since COVID-19 was
declared a pandemic. According to Cornerstone Advisors,
he Consumer Financial Protection Bureau is consumers were expected to make $100 billion in BNPL
on a tear. And that's potentially good news for purchases in 2021, up from $24 billion in 2020 and $20
acquirers, ISOs and merchant level salespeople, billion in 2019. But there is a real consumer downside.
T as the bureau seems ready to rein in big tech According to research by Credit Karma, a third of U.S.
companies' forays into the payments space. consumers who use BNPL services have fallen behind on
one or more payments, and 72 percent of those consumers
The CFPB is a consumer watchdog agency created by saw their credit scores drop as a result.
the Dodd-Frank Act. It's an independent agency within
the Federal Reserve charged with promoting fairness in The CFPB's action comes as many in Congress raise red
consumer financial services. Its supervisory authority flags over BNPL. In December, just days before the CFPB
extends to banks and credit unions with assets over $10 issued its orders to BNPL providers, six members of the
billion, as well as large nonbanks in consumer financial Senate Banking Committee, including committee chair
markets. Think Square, Apple, PayPal. Sherrod Brown, D-Ohio, wrote Chopra requesting tighter
regulation of these companies.
The director of the CFPB is appointed by the President,
and the current appointee is Rohit Chopra. Prior to "BNPL products generally do not receive all of the
helming the CFPB, Chopra was a commissioner at the protections credit cards have, including those governing
Federal Trade Commission, where he spearheaded efforts ability-to-repay, monthly statements, reasonable and
to scrutinize the business practices of big tech companies proportional penalty fees, and the ability to raise
like Facebook, Google and Amazon. merchant-related disputes," the committee members
stated. "In addition, nonbank BNPL providers currently
In October 2021, the CFPB ordered six major tech firms to operate without meaningful oversight. They are not
turn over information concerning how they harvest and generally subject to federal supervision that can spot
profit from users' payment data. Then in December, the unfair, deceptive, or abusive practices or other violations
watchdog agency issued orders to five companies in the of federal consumer protection laws. ... This regulatory
buy now, pay later (BNPL) space, seeking information on gap has troubling implications."
the risks and benefits of these fast-growing loan products.
The CFPB, in disclosing its inquiry into BNPL, noted that
BNPL in the crosshairs it is not alone. Regulators have similar inquiries underway
in several countries, including the U.K., Germany, Sweden
BNPL is marketed to consumers as a safer alternative to and Australia, and the CFPB is coordinating with them.
credit card debt, and as helpful for consumers with scant
or subprime credit histories. And it has gained a lot of Regulation looms for big tech in payments
traction. McKinsey & Co. reported in 2021 that fintechs
have diverted $8 billion to $10 billion in annual revenues The CFPB's orders regarding BNPL came on the heels of
from banks with BNPL offerings. a set of orders requesting six big tech firms—Amazon,
Apple, Facebook, Google, PayPal and Square—to hand
Merchants typically pay 3 to 6 percent of the purchase over information detailing their payment systems
price to companies offering the service, which is higher activities and how they manage personal user data related
than card interchange in most cases, but merchants seem to payments and financial information.

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