Sat. Nov 27th, 2021


But consumer lawyers are skeptical. “Buy now, pay later,” is a misnomer, says Marisable Torres, director of California policy at the Center for Responsible Lending. These are short-term loans that are repaid in installments, the terms of which may change dramatically. Some late fees are included but not interest; Others take interest. Some credit bureau reports and some do not. Consumer advocates say the variety of offers can be confusing, especially for younger users with a low credit history or financial literacy.

Afterparty, for example, BNPL does not charge interest on services, but collects it A $ 87 million ($ 64 million) delay fee From users in the 12 months ending June 30th. Ensure that late fees are not charged but are collected $ 200 million in interest payments From consumers within the same 12 month period.

“Regulators need to look under the hood to see exactly how much profit these firms are making coming from what they’re charging too late a fee for,” Torres said. Can talk to a business model designed to profit from high default rates and inability to repay user loans. “We’ve seen the credit flood market before when no one paid attention,” he says. “It was not good for the consumer or the economy.”

Coming to the attention of lawmakers and regulators. Earlier this month, the House Financial Services Committee heard from consumer advocates about the potential risks to consumers of the service. Torres and other witnesses called for stricter controls and more data on how often users default, the potential long-term impact on credit scores, and more stringent regulations surrounding credit approval.

The Bureau of Consumer Financial Protection issued one in July Blog post To guide consumers. Among other things, the post warns, “Don’t overdo it.”

“We have the experience of working with regulators to create the many protections we already have,” said Harris Qureshi, head of public policy at AfterPay. He noted that the service freezes a user’s account if they miss payment and offers a “hardship line” for users unable to pay due to unforeseen problems.

In a statement to WIRED, a confident spokesman said the company does not charge late fees, informs consumers in advance of their total costs and screens users before approving BNPL funding.

A spokesman for Clarner said in an emailed comment that “we understand and support reasonable regulations and comply with those regulations” which are enforced by state and federal agencies. “However, we do not believe that interest-free products should be regulated in the same way as high-interest products.”

Merchants, too, pay a fee for the services, usually a flat charge of 30 cents per purchase, a commission of about 4 to 6 percent of the purchase, or sometimes both. This, too, is variable. Merchant fees and transactions are made About half Of course its revenue but More than 90 percent AfterPay’s but some merchants prefer the service.

“As soon as I started using it, I sold more products,” said Brittany Aaron, who sells baths and body products at her online store, Angel Kisses. Since offering ShopPay and AfterTap at the beginning of last year, Aaron says sales have increased by about 30 percent, with nearly 70 percent of users purchasing products through the BNPL service.

Aaron says the fees he pays for the services are a small price for a large increase in buyers’ baskets. Since offering the service, BNPL buyers have spent more on each trip. A recent survey by Lending Tree found that a quarter of BNPL users Admitted that they bought more If they have to pay out of pocket then the service will be used more than them.



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