FILE – Consumer Financial Protection Bureau Director Rohit Chopra speaks from the South Court Auditorium on the White House complex in Washington, April 11, 2022. The Consumer Financial Protection Bureau says in a new rule that buy now, pay later lenders are basically credit card providers and must provide the same protections and rights that apply to those lenders. (AP Photo/Jacquelyn Martin, File)
Buy now, pay later companies must provide consumers with the same legal rights and protections as credit card lenders do, the Consumer Financial Protection Bureau said Wednesday in a new rule.
That includes the right to demand a refund and to dispute transactions. The agency began an inquiry into the short-term lending industry two years ago, and it issued the rule in response to ongoing consumer complaints, it said.
Here’s what you need to know.
WHAT’S BEHIND THE NEW REGULATION?
Buy now, pay later loans are typically marketed as zero-interest, or low interest, and allow consumers to spread out payments for purchases over several weeks or months. They’re marketed as a way to buy expensive products and services over time, and the service is typically offered at checkout for online shopping. It’s often used for big-ticket items, like furniture, clothes and airline tickets.
In a report, the CFPB found that more than 13% of buy now, pay later transactions involved a return or dispute, and, in 2021, people disputed or returned $1.8 billion in transactions at the five companies surveyed.
“Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books,” CFPB Director Rohit Chopra said in a statement.
HOW IS THE INDUSTRY RESPONDING TO THE RULE?
Two major buy now, pay later players — Affirm and Klarna — say they welcomed the regulation.
“We are encouraged that the CFPB is promoting consistent industry…
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