CFPB study details the rapid growth of ‘Buy Now, Pay Later’ lending

The Consumer Financial Protection Bureau published a report offering key insights on the Buy Now, Pay Later industry. The report,  Buy Now, Pay Later: Market trends and consumer impacts, finds the industry grew rapidly during the pandemic, but borrowers may receive uneven disclosures and protections. The five firms surveyed in the report originated 180 million loans totaling over $24 billion in 2021, a near tenfold increase from 2019.

“Buy Now, Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards,” said CFPB Director Rohit Chopra. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan.”

Buy Now, Pay Later is a form of interest-free credit that allows a consumer to fully purchase a product and then pay back the loan over four installments, with the first installment typically being a down payment on the purchase. Most Buy Now, Pay Later loans range from $50 to $1,000, and are subject to late fees if a borrower misses a payment.

Buy Now, Pay Later rose to prominence in the past decade as an alternative form of credit for online retail purchases. The lending option has gained traction with consumers who seek the flexibility of being able to pay for goods and services over time but who may have been leery of other credit products.

Once a niche financial offering that was heavily concentrated in apparel and beauty, Buy Now, Pay Later has branched out to industries as disparate as travel, pet care, and even groceries and gas. Apparel and beauty merchants who had combined to account for 80.1% of originations in 2019 only accounted for 58.6% of originations in 2021.

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