New York Steps Up to Protect Buy Now, Pay Later Borrowers
State protections needed as Trump Admin backs off key consumer protections
While the Trump Administration is focused on giveaways to Big Banks and Big Tech at the expense of consumers, some states are stepping up to fill the void.
Gothamist reports:
New York state is set to regulate the “buy now, pay later” loans used to pay for hundreds of millions of online and in-person purchases each year, stepping in to fill a void left when President Donald Trump’s administration rolled back similar efforts at the national level.
Gov. Kathy Hochul and state lawmakers agreed to enact a wide-ranging set of rules for the burgeoning industry dominated by companies including Klarna, Afterpay, Affirm and PayPal, who offer consumers the ability to split their purchase into multiple, interest-free payments.
New York enacted its new law less than a month after the Trump administration’s CFPB announced it would no longer enforce a Biden-era policy that effectively treated the buy now, pay later lenders the same as credit card companies. That federal policy gave consumers similar protections to what New York is now enacting.
While Buy Now, Pay Later is an expanding part of the financial marketplace, its impact on users is mixed. It can provide low or no-cost access to small-dollar, short-term credit. It can also cause a lot of headaches.
A survey revealed that while BNPL plans can seem like a great idea, the result can be a delicate balancing act to manage payments and other bills.
32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.
U.S. PIRG: Our findings, based on a review of complaints to the Consumer Financial Protection Bureau (CFPB) and the Better Business Bureau (BBB), show that hidden fees, interest and debt collection problems can harm consumers. We also find that consumers also face problems with customer service.
Lewis then lays out what happens (or could happen) if you pay late:
But if you pay late, you may be subject to a flat fee or a fee calculated as a percentage of the total you owe. These can run as high as $34 plus interest. If you miss multiple payments, you may be shut out from using the service in the future, and the delinquency could hurt your credit score.
Seems like a pro-consumer Administration would want to establish some basic guardrails. That’s just what the Biden team did - and just what the Trump team dismantled.
Kudos to New York for stepping up - just 49 more states to go.
So with the CFPB weakened, what do you do if you’re the victim of a financial fraud or scam?
First, start with your state’s Attorney General.
Attorneys General typically have consumer protection divisions and can apply relevant state laws to your situation. Sometimes, if an AG asks, a company will answer.
Second, let your Member of Congress know. One, they may be able to assist with a resolution. But also, it is important for Congress to know their constituents value the work formerly performed by CFPB. Congress can rescue the consumer champion from the DOGE Death Star . . . if they want to.