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The federal financial protection watchdog says “buy now, pay later” (BNPL) companies will now have to offer credit card-level protections to shoppers.
After more than two Year U.S. Consumer Financial Protection Bureau (CFPB) BNPL Market Research Report Created The new rules enacted Wednesday will ensure that BNPL lenders, including Affirm, Klarna and Afterpay, provide essential rights and protections to Americans.
Under the new rules, BNPL lenders will have to do three things:
- Look into customer-initiated payment disputes. Customers are not required to continue making payments while the company investigates the issue.
- If someone returns an item or cancels an order, a refund will be made to the shopper’s account.
- Just like your credit card company, we will send you periodic billing statements.
According to CFPB Director Rohit Chopra, these are all protections that customers previously did not have available by default across their enterprises.
Related: Klarna announces AI assistant will do 700 jobs
“When consumers check out and choose buy now, pay later, they don’t know if they’ll get a refund if they return the product, or if lenders will help them if they don’t get what they were promised,” Chopra said. statement.
Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB).Photo by Tierney L. Cross/Bloomberg via Getty Images
a 2022 According to a CFPB market report, nearly 14% of BNPL purchases made with Affirm, Afterpay, Klarna, PayPal, and Zip (formerly Quadpay in the US) from 2019 to 2021 involved returns or disputes.
The five companies had combined revenue of $1.8 billion in 2021, according to the report.
The regulation “clarifies how government agencies apply long-standing laws and regulations to this common form of credit,” Chopra said.
Related: “Buy now, pay later” is becoming increasingly popular among high-income earners.
Affirm, where more than half of U.S. consumers are BNPL companies recognize By name, already pause Payment in case of customer dispute I will send Monthly statements, just like other BNPL lenders like Klarna.
A Klarna representative said: entrepreneur The CFPB’s announcement is “an important step forward in BNPL regulation, which Klarna has been actively seeking for many years.” A representative from Affirm responded as follows. X thread CEO Max Levchin wrote, “CFPB clarity and level playing field = good and positive for consumers.”
We affirm that CFPB clarity and level playing field = good for consumers. The rest of the industry needs to step up to live up to our promise, rather than repackage credit card old pain points in glossier wrapping paper. 5/5
— Max Levchin (@mlevchin) May 22, 2024
The global BNPL market is cherished By 2022, it will exceed $250 billion.