Worries grow over ‘buy now, pay later’ loans
BOSTON, Mass. (WWLP) – Attorneys general from 21 states, including Massachusetts, are asking the Consumer Financial Protection Bureau (CFPB) to take a closer look at lending practices that may violate federal and state consumer laws .
Read the Attorneys General’s letter to the CFPB.
The coalition of attorneys general is concerned about “buy now, pay later” (BNPL) lending practices that can result in consumers being locked into rotating debt. These are installment loans that offer consumers the option of purchasing products or services online with little or no down payment and then repaying the loan in short installments. Although most BNPL loans do not charge interest, they do charge fees for late payments, which can lead to a significant increase in the loan amount. They report late or missed payments to the credit bureaus, which impacts credit scores. Lenders also do not consider the consumer’s ability to pay during the application process.
And, unlike a credit card purchase, these loans don’t offer dispute protection if the purchased item is lost, stolen, or defective, or if you’re the victim of a scam.
“Lenders who buy now and pay later can make promises that seem too good to be true, and often they are, resulting in borrowers paying a lot more money in deals they can’t get out of. “said AG Healey. “I join my colleagues in calling on the CFPB to look into the practices employed by this industry and ensure that consumers are not preyed upon so that lenders can make an unfair profit.”
According to Healey’s Consumer Advocacy Report, consumers said they were unaware they were taking out a loan and were asked to pay more money than originally expected. The report offers advice for consumers to consider before taking out a new loan, including some questions to ask:
- What is the interest of the loan?
- What is the term of the loan?
- What charges occur if you make a late or partial payment?
- What do you lose if you can’t repay the loan?
The coalition of states includes California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Vermont and Washington. such as the Hawaii Consumer Protection Office.