Regulators now one step closer to reining in "Buy now, pay later" companies

“Buy now, pay later” services are about to be tamed.

Driving the news: Earlier today, the Consumer Financial Protection Bureau, created after the financial crisis to regulate predatory lending practices, issued its much-anticipated report on how it might oversee companies like Affirm and Afterpay.

Why it matters: The pay-by-installment industry has credited their popularity to widespread distrust of credit cards. Now they could be treated by regulators in the same way.

Details: Firms in the BNPL space are facing regulation both as financial companies and as tech companies, Axios Pro’s Lucinda Shen notes.

• The watchdog plans to regulate them the same way as it does credit card companies, and is looking into customer fees and ways to limit how personal data is used by such businesses.
• "Our concern with data in general is that, once the company has that data, there's no knowing where the line could be drawn and what they could do with it," a CFPB official said on a call with media. 

The other side: Affirm says in a statement that it's "encouraged" by the conclusions and that today is a "big step forward for consumers and honest finance."

• Klarna tried to distance itself from "high-cost credit products" saying in its statement that "low-cost, low-risk, no-interest products like BNPL should not fundamentally be regulated in the same fashion."

The big picture: D.C. has had its eye on the industry as 4 in 5 U.S. consumers who use BNPL say they do it to avoid credit card debt.

• Merchandise purchased through Affirm, Afterpay, Klarna, PayPal and Zip grew to $24.2 billion last year, nearly triple what it was in 2020 ($8.3 billion) and more than 12x that in 2019 ($2 billion), the CFPB found.

What to watch: How future rules may curb consumer spending, especially among younger shoppers who have been big drivers of BNPL use.