In November 2023, consumers used Buy Now, Pay Later (BNPL) credit to spend $8.3 billion online, an increase of 17 percent from the same period in 2022

At the same time, reports indicate that American households’ savings are down and many of them are struggling to repay elevated credit card, auto, and other debts

The increased use of BNPL and the debt burden being carried by the typical holiday BNPL customer make it all the more important that consumers are protected during the holiday season, whether they finance their holiday shopping using a credit card or BNPL loan

Senator Reverend Warnock to the CFPB: “We are concerned that, after the holiday season is over and the bill comes due, consumers will continue struggling with BNPL products. […] I urge you to use your full regulatory and supervisory authority to protect Americans against any potential harms”

Washington, D.C. — Today, U.S. Senator Reverend Raphael Warnock (D-GA) urged Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra to monitor the risks posed by “buy now, pay later” (BNPL) products, which allow consumers to pay off certain purchases in several installments, but may come without important consumer protections that other loan products contain. In a letter to Director Chopra, Senator Warnock urged the Director to monitor BNPL products as consumers significantly increase their use during the holiday season. The letter comes after Director Chopra disclosed the CFPB is monitoring BNPL products at aBanking, Housing and Urban Affairs Committee hearing last month. Senator Warnock was joined by U.S. Senators Sherrod Brown (D-OH) and John Fetterman (D-PA) in advocating for greater consumer protection on BNPL product this holiday season.

“At the Senate Banking Committee’s semi-annual Consumer Financial Protection Bureau (CFPB) oversight hearing last month, you noted that you were monitoring “buy now, pay later” (BNPL) products. We urge you to continue focusing on this increasingly popular form of consumer credit and use the full range of your authority to ensure that it is not used to prey upon consumers. While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season,” the Senators wrote.

Senator Warnock and the lawmakers continued, “These trends should make us cautious about BNPL use. Research suggests that BNPL tends to be used among people with lower incomes, lower credit scores, and higher rates of delinquency on other debt. These are Americans who can least afford the potentially harmful aspects of BNPL, such as forced autopay, shoddy dispute resolution practices, negative information in their credit reports, and late fees. The CFPB must ensure that BNPL does not become a method to take advantage of struggling consumers.”

As the chair of the Senate Banking subcommittee that oversees the CFPB, Senator Warnock has been a dedicated champion for Georgia consumers, including working in Washington pushing to hold big banks and major corporations to account for reckless and greedy behavior. In late July 2023, Senator Warnock held a subcommittee hearing examining how junk fees and predatory practices hurt the wallets of everyday Americans.

Read the full letter HERE and below:

Dear Director Chopra:

At the Senate Banking Committee’s semi-annual Consumer Financial Protection Bureau (CFPB) oversight hearing last month, you noted that you were monitoring “buy now, pay later” (BNPL) products. We urge you to continue focusing on this increasingly popular form of consumer credit and use the full range of your authority to ensure that it is not used to prey upon consumers. While BNPL might provide some consumers with helpful flexibility, it also presents new risks that the CFPB should continue to monitor and guard against, especially in light of the significant increase in the use of BNPL during the holiday season.

A typical BNPL loan allows a consumer to split the cost of a purchase across four installments, repayable every two weeks. BNPL is typically used for online purchases in the range of $50 to $1,000. If all goes well for the consumer and they can meet all installments, BNPL usually incurs no interest and no fees. However, BNPL may be structured to encourage consumers to purchase more and take on more debt. Unfortunately, consumers can overextend their finances in a short period of time, making the BNPL debt unmanageable. 

This year, as the holiday season progresses, the use of BNPL has surged. In November 2023, consumers used BNPL credit to spend $8.3 billion online, an increase of 17 percent from the same period in 2022. At the same time, reports indicate that American households savings are down and many of them are struggling to repay elevated credit card, auto, and other debts. The increased use of BNPL and the debt burden being carried by the typical holiday BNPL customer make it all the more important that consumers are protected during the holiday season, whether they finance their holiday shopping using a credit card or BNPL loan.

These trends should make us cautious about BNPL use. Research suggests that BNPL tends to be used among people with lower incomes, lower credit scores, and higher rates of delinquency on other debt. These are Americans who can least afford the potentially harmful aspects of BNPL, such as forced autopay, shoddy dispute resolution practices, negative information in their credit reports, and late fees. The CFPB must ensure that BNPL does not become a method to take advantage of struggling consumers.  

We are concerned that, after the holiday season is over and the bill comes due, consumers will continue struggling with BNPL products. I appreciate your longstanding attentiveness to this issue, and I urge you to use your full regulatory and supervisory authority to protect Americans against any potential harms. 

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