| Entities | Consumer Reports (4) |
| Topics and Issues |
In July 2023, Consumer Reports issued a white paper on Buy Now, Pay Later (BNPL). The report is Buy Now, Pay Later: Policy Measures to Mitigate Consumer Risks from Evolving Practices. The report notes that
Unfortunately, the “free and seamless” nature of BNPL can be a double-edged sword. As of December 2022, 21% of Americans reported having used a BNPL service. Many consumers express a positive view of BNPL, in particular appreciating the ability to spread out payments with no interest. However, research shows that BNPL users are typically worse off financially than non-users, and the top reason BNPL users cite for using BNPL is to make a purchase that they could not afford otherwise. The data suggests that while some consumers are indeed benefitting from BNPL, others are using BNPL in a manner harmful to their financial well-being.
The report offers a number of policy suggestions:
- Enhancing disclosure and transparency, in particular making clearer distinctions between interest-free and interest-bearing loans and developing a standardized format for disclosing product features and pricing.
- Requiring BNPL providers to assess a consumer’s ability to repay, with potential exceptions for the smallest BNPL loans offered via blind “lend-to-learn” models and putting in place other responsible lending measures.
- Requiring BNPL providers to report to credit bureaus and developing an appropriate approach for how to treat BNPL data.
- Establishing stronger data privacy measures, particularly on the collection, use, and sharing of data.
- Extending chargeback rights for credit cards to ensure that BNPL users have clear rights with respect to dispute resolution.