en en it en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en en pl en en en en en sv fr de de fr fr fr sv en fr en ja fr de fr es nb fr de en en sv de de fr en fr it fr en fr en ar en en en en en en
The U.S. Consumer Financial Protection Bureau (CFPB) plans to start regulating “buy-now, pay-later” (BNPL) companies like Klarna and Affirm Holdings due to worries their fast-growing financing products are harming consumers, the agency said on Thursday.
The watchdog, which does not currently oversee BNPL companies or products, will issue guidance or a rule to align sector standards with those of credit card companies, it said. The agency also said it would implement appropriate supervisory examinations.
This advertisement has not loaded yet, but your article continues below.
Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300
A welcome email is on its way. If you don’t see it, please check your junk folder.
The next issue of Financial Post Top Stories will soon be in your inbox.
We encountered an issue signing you up. Please try again
The development will be a blow for the sector, which is already under pressure due to rising funding costs and lower American consumer spending during soaring inflation.
It also marks a major offensive for CFPB director Rohit Chopra, who has pledged to scrutinize tech-driven companies as they increasingly encroach on the traditional financial sector.
“In the U.S., we have generally had a separation between banking and commerce, but as big tech-style business practices are adopted in the payments and financial services arena, that separation can go out the door,” he told reporters.
PANDEMIC POPULARIZED BUY-NOW, PAY LATER COMPANIES
BNPL services, which allow consumers to split purchase payments into installments, exploded in popularity as Americans turned to online shopping during the coronavirus pandemic. Providers charge online retailers a fee for each transaction.
This advertisement has not loaded yet, but your article continues below.
Following an inquiry last year, the CFPB found that BNPL providers Affirm Holdings, Block’s Afterpay, Klarna, PayPal and Australia’s Zip Co originated a combined 180 million loans in 2021, totaling $24.2 billion, a more than 200% annual increase from 2019.
The CFPB in its report, however, said it was concerned their products could pose risks to consumers, highlighting a lack of standardized disclosures across the five companies surveyed and the potential for consumers to become overextended.
In particular, the CFPB said because BNPL providers do not give data to credit reporting agencies, lenders might have an incomplete picture of a borrower’s liabilities, including BNPL loans at rival companies.
The agency also pointed to customer data collection as a consumer risk, and said it would start identifying data surveillance practices BNPL companies should avoid.
This advertisement has not loaded yet, but your article continues below.
In a statement, a spokesperson for Affirm said its top priority is “empowering consumers by providing a safe, honest and responsible way to pay over time with no late or hidden fees.”
“Today represents a big step forward for consumers and honest finance, and we are encouraged by the CFPB’s conclusions following their review,” the spokesperson said, noting that the CFPB’s report acknowledged that BNPL imposes significantly lower costs on consumers compared with traditional credit products.
A spokesperson for Klarna said the company “is committed to financial wellbeing and protecting consumers through industry innovation and proportionate regulation.”
“We’re pleased the CFPB recognized the value BNPL gives to consumers, including access to credit, ease of use, and lower costs, particularly going into challenging economic times,” said a spokesperson for Zip.
This advertisement has not loaded yet, but your article continues below.
Penny Lee, CEO of the Financial Technology Association, a trade group that represents Afterpay, Klarna, PayPal and Zip, said in a statement that the report made clear that BNPL is a competitive alternative to high-interest credit products.
“We look forward to continuing working with regulators like the CFPB to advance positive consumer outcomes,” she said.
The CFPB was created in the wake of the 2008 financial crisis to crack down on predatory lenders, such as mortgage companies and payday lenders.
While the agency has not traditionally overseen BNPL companies, Chopra told Reuters in July he believes he has the power to regulate companies’ activities when they are similar to those of traditional financial services firms.
BNPL companies are likely to fight that assertion, however.
Share prices of public “buy-now, pay-later” companies have been under pressure this year, with Affirm down more than 75% and Zip down 79%. Klarna’s valuation plunged around 85% in July.
(Reporting by Hannah Lang in Washington; Editing by Michelle Price, Josie Kao, Jonathan Oatis and Diane Craft)
Share this article in your social network
This advertisement has not loaded yet, but your article continues below.
Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.
Quoted from Various Sources
You may also like
Japan’s Shionogi says COVID pill reaches Phase III milestone By Reuters
Wall Street banks to pay $1.8bn over messaging violations
Hockey players’ scoring after learning their teammates’ pay could show the pitfalls of knowing what your coworkers make
Cathie Wood’s new fund gives small investors access to the VC market for just $500
Farmers threaten to quit NFU as leader backs scrapping of “Brexit bonus” nature subsidies
Gold Rises From Two-Year Low as Dollar’s Steep Increase Stalls
Japan’s Shionogi says COVID pill reaches Phase III milestone By Reuters
Wall Street banks to pay $1.8bn over messaging violations
Hockey players’ scoring after learning their teammates’ pay could show the pitfalls of knowing what your coworkers make
Cathie Wood’s new fund gives small investors access to the VC market for just $500
Farmers threaten to quit NFU as leader backs scrapping of “Brexit bonus” nature subsidies
Categories Select Category @Nordstrom #EQUALITY • 7 of 8 People Are Clueless About This Trillion-Dollar Market • Motley Fool Issues Rare Triple-Buy Alert • This Stock Could Be Like Buying Amazon in 1997 $230 billion in cash 000 medical trainees from foreign countries 2017 6 AAN AAPL according according to Ariely AMZN annual sales anti-Trump protest in Mexico City bailout agreed in 2015 behavioral economist Dan Ariely BIG biometric payments brought back unlimited plans earlier last year Business Administration Business Analyst Business Center Business Class Business Consultant Business Development Business Digital Business Economics Business Environment Business Executive Business Global Business Goals Business Growth Business Idea Business Inquiries Business Intelligence Business Journal Business Kit Business Knowledge Business Logic Business News Business Plan Business Risk BuzzFeed noted last December. CHTR clashing with Apple CNNMoney’s own Fear & Greed Index COKE compliance cut its CEO’s pay deal immediately boosted prices described eliminated its version of an unlimited usage plan in 2011 EQIX February 12 February 8 finally disappear in 2017 General Article GOOG Health hinted that Tesla may soon come to India. INFY intraday trading high is scheduled for a final vote before the full Senate IWM JJSF jumped 7{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} in the first two days JWN KAMN knocked the department store on Twitter in retaliation LeBron James M made their own bids to attract customers MAS MSFT NAFTA Nearly all NYC subways get cell service one of the top buyers pic.twitter.com/ki5NaJN12d Qapital Visa Debit Related: ‘Without NAFTA’ we’d be out of business Related: A startup that makes pencils that grow into vegetables Related: Apple stock nears a record high Related: Charter shares popped on report of possible Verizon takeover Related: Elon Musk’s surprising secret weapon: Trump? Related: Here’s why the world’s largest money manager is worried Related: How Europe’s elections could be hacked Related: India freaks out over U.S. plans to change high-skilled visas Related: Is Ivanka Trump’s brand losing its bling? Related: Kellyanne Conway unrepentant for Ivanka Trump plug Related: Mexican farmer’s daughter: NAFTA destroyed us Related: Mexico doubles down on Trump ‘contingency plan’ Related: Obamacare’s impact on this Alaska town with only one doctor’s office Related: OPEC has pulled off one of its ‘deepest’ production cuts Related: Oreo make is worried about rise of populism Related: Possible pick for Treasury secretary makes his film debut Related: Pro-Trump boycott calls follow Super Bowl ads Related: Rare streak for U.S. stocks: Long stretch without a 1{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} dive Related: Remember Smoot-Hawley: America’s last major trade war Related: Stocks have avoided a 1{3b930a6ca12a59604e1bbadfc55b7d1b7a0aa8613f1ab9377cace0d5afcb5fb9} dive for an unusually long period of time Related: T-Mobile and Sprint offer new ‘unlimited’ data plans — sort of Related: Tech industry braces for Trump’s visa reform Related: Tesla reveals what it will charge for a charge Related: The company turning 4 billion plastic bottles into clothes Related: Those Reagan tariffs Trump loves to talk about Related: Tim Cook: ‘Apple would not exist without immigration’ Related: Trump furious after court upholds block on travel ban Related: Trump isn’t killing the bull market Related: Trump travel ban and what you need to know Related: Uber CEO drops out of Trump’s business advisory council Related: Uber suspends its service in Taiwan as fines mount Related: Uber’s rivals are teaming up in Asia Related: Verizon brings back unlimited data plans Related: Visa ban could make doctor shortage in rural America even worse Related: Wall Street has powerful seat at Trump’s table renegotiate NAFTA research S said Jan. 13 sales Saudi oil minister: I don’t lose sleep over shale Sears spokesman Brian Hanover told Reuters Serena Williams similarly eliminated overage fees for customers in September smartphone recall woes Smoot-Hawley Act. Speaking with The Daily Telegraph newspaper T teased plans temporarily halted temporary immigration ban tenth anniversary TIF TJX TMUS to go green Trump has often slammed TSLA TWX VG VIX VZ why it decided to stop carrying Ivanka Trump’s clothing and accessories label YHOO
Archives Select Month September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 January 2022 December 2021 November 2021 October 2021 August 2021 July 2021 May 2021 March 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 September 2018 February 2017 January 1970