CFPB Research Notes The Rapid Growth of “Buy Now, Pay Later” Lending | Consumer Protection Agency

Washington, DC – Today, the Consumer Financial Protection Bureau (CFPB) published a report that offers key insights into the Buy Now, Pay Later Industry. The report, Buy Now, Pay Later: Market trends and consumer impact , shows that businesses grew rapidly during the pandemic, but borrowers may have unequal information and security. The five companies analyzed in the report originated 180 million loans to exceed $ 24 billion in 2021, a tenfold increase from 2019.

“Buy Now, Pay Later is a fast-growing type of loan that is a close substitute for credit cards,” said CFPB Director Rohit Chopra. “We will work to ensure that borrowers have the same protections, whether they use a credit card or a buy now, pay later loan.”

Buy Now, Pay Later is a type of interest-free credit that allows the customer to purchase a product in full, then repay the loan over four installments, and the installment first is usually a down payment on the purchase. Most Buy Now, Pay Later Loans range from $50 to $1,000, and payments can be delayed if a borrower misses a payment.

Buy Now, Pay Later rose to popularity in the last decade as an alternative credit system for online shopping. The option of the loan has given interest to customers who are looking for the flexibility of being able to pay for goods and services over time, but who may be afraid of other credit products.

Originally a special financial offer focused on clothing and beauty, Buy Now, Pay Later has now expanded to various industries such as travel, pet care, and more. enough for groceries and gas. Clothing and beauty retailers, who together accounted for 80.1% of startups in 2019, will only account for 58.6% of startups in 2021.

Other key features of Buy Now, Pay Later personal loans include:

  • Loan approval rates are increasing: 73% of applicants were approved for loans in 2021, up from 69% in 2020.
  • Old bills are becoming more common: 10.5% of consumers bought at least one old bill in 2021, up from 7.8% in 2020.
  • There are many sales that end in income: 13.7% of each loan in 2021 had a part of the order returned, from 12.2% in 2020.
  • Lenders’ profit margins are reduced: Increase in 2021 to 1.01% of total loan origination, from 1.27% in 2020.

The marketing of Buy Now, Pay Later Loans can make it look like there is no credit risk, but today’s report identified several areas that could be affected. customers, including:

  • Consumer protection: Borrowers looking for Buy Now, Pay Later Loans can approach products that don’t offer protections common elsewhere in the financial market. right These include the lack of standard credit-cost information, limited rights to dispute resolution, the pressure to choose in to pay cars, and companies that consider many old bills in the same payment that was missed.
  • Data analysis and financing: Many Buy Now, Pay Later are shifting their business model to using custom content, which allows them to build a valuable digital information of individual purchases and behavior. The practice of harvesting and monetizing customer information on payday and virtual loans may threaten customer privacy, security, and integrity. together. It can also lead to the concentration of market power in the hands of a few technology giants who hold large amounts of customer data, reducing innovation, choice, and cost competition.
  • Accumulate debt and optimization: Buy Now, Pay Later is engineered to encourage consumers to buy more and borrow more. As a result, borrowers can easily complete multiple loans in a short amount of time with multiple lenders or Buy Now, Pay Now Later debts may have implications for other debts. Since most Buy Now, Pay Later do not provide information to the major credit reporting companies, not all of the Buy Now, Pay Later Follow up with other borrowers on current liabilities when making a decision to take out new loans.

Buy Now, Pay Later is offered under federal and state regulation. The CFPB has enforcement authority over credit providers, and has the authority to prosecute any non-depositors. packages, such as Buy Now, Pay Later, in some cases. Some states consider Buy Now, Pay Later to be a credit broker and require state licensing or registration, as well as compliance consumer credit laws, while other states do not require a license or registration for Buy Now, Pay Later products with no interest or fees. charges.

To address consumer concerns, the CFPB will introduce interpretive guidelines or rules that will be issued with the goal of ensuring that the Buy Now, Pay Later rules are followed by consumers. Many basic protections have already been established by Congress for credit cards. As part of this review, the agency will also ensure Buy Now, Pay Later, just like credit card companies, are doing due diligence.

In order to solve the potential problems in data harvesting, the CFPB will introduce data monitoring systems that should be tried to avoid them.

To reduce the risk of credit overdrafts, the CFPB will continue to discuss ways the industry can develop appropriate practices. and credit reporting accuracy. The agency will also take steps to ensure the method used by the CFPB and other parts of the Federal Reserve System to determine the burden of household debt.

Today’s report comes after the The Officer announced a study to monitor the market in December 2021 to gain more insight into the industry. In January 2022, the CFPB give a public notice and ask for comments from the public on their experiences with Buy Now, Pay Later Loans. The data and information in the report are based on information from that request, as well as corroborating information in the CFPB’s complaint records. Public and publicly available financial information and other sources from the five companies that received the Bureau’s market surveillance orders.

Read today’s report, Buy Now, Pay Later: Market trends and consumer impact

Read Director Chopra’s prepared remarks at the opening of the report.

Customers who have a problem with a Buy Now, Pay Later product or service, or any other financial product or service it is possibleFile a complaint with the CFPB onlineor by phone (855) 411-CFPB (2372).


The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps the consumer financial market work by making the rules more effective, by consistently and fairly enforcing those rules. , and by empowering consumers to take more control of their financial lives. For more information, visit

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