Consumer Group Urges Caution on Buy Now, Pay Later

Advocate Andy

U.S. PIRG warns that convenience can come with a cost

The U.S. Public Interest Research Group (U.S. PIRG) issued a report analyzing complaints made to the Consumer Financial Protection Bureau (CFPB) on Buy Now, Pay Later products. The report contained key findings that create cause for concern around these products.

In a press release, PIRG warned of the hazards of using such products - offered by companies such as AfterPay, Sezzle, Klarna, Affirm, and others.

“There’s no such thing as a free lunch. Or free airline tickets. Or free appliances. But it isn’t hard to get the latter two with no money down these days with the proliferation of ‘Buy Now, Pay Later’ plans,” said Ed Mierzwinski, the senior director of U.S. PIRG Education Fund’s consumer program. “Many of these installment plans, often advertised as ‘free’ to the consumer if all payments are made on time, aren’t run by the company you buy your furniture or electronics from. Instead, they’re managed by third-party financial firms -- known as fintechs -- and some claim they aren’t subject to credit card consumer protections.” 

The report offers these recommendations to consumers:

Do your homework before agreeing to a BNPL program. Be aware that some BNPL programs charge interest and others charge late fees. Be sure you always have adequate funds in your accounts to make BNPL payments, which may be at irregular intervals from regular credit card statements. Also, you may have agreed to autopay withdrawals, which may cause overdrafts on your account.

Mike Litt of U.S. PIRG said it is important for regulators to build-in consumer protections:

“At the point of purchase, a BNPL offer of six weeks or two months with no interest may seem better than the revolving monthly interest rate if you don’t pay your credit card bill in full,” said Mike Litt, U.S. PIRG Education Fund’s consumer campaign director. “But at the end of the day, buyer beware if you don’t make all your payments on time. The CFPB needs to make sure that no matter how you pay, you get consumer protections.” 

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Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

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