State AGs warn over risks of buy now, pay later loans
Add Axios as your preferred source to
see more of our stories on Google.
Photo: Brent Lewin/Bloomberg via Getty Images
Have you ever used a buy now, pay later plan? Well, it turns out those loans can come with more risks than the companies disclose upfront.
Why it matters: BNPL loans from providers like Affirm, Afterpay, Klarna and PayPal are nearly ubiquitous at checkout — but regulators warn they could saddle shoppers with hidden fees, steep interest or long-term credit damage if payments are missed.
Driving the news: California Attorney General Rob Bonta on Tuesday joined Connecticut, Colorado, Illinois, Minnesota, North Carolina and Wisconsin in urging the six largest lenders to provide detailed disclosure of loan terms, underwriting standards, billing practices, late-fee policies and more.
- The inquiry surfaced after recent regulatory shifts scaled back obligations and enforcement for these lenders under federal consumer protection rules, prompting renewed concern over borrowers' risk.
With the holiday shopping season in full swing and economic pressures rising, state leaders are advising consumers to:
- Avoid using the loans when possible.
- Skip or delay items you can't afford up front.
- Opt for credit cards, bank loans or community-based lenders.
- Read the fine print over payment schedules, fees, interest and subscription charges.
- Monitor BNPL accounts for billing mistakes or unauthorized charges.
- Track due dates closely to avoid surprise withdrawals.
- Demand a refund from the lender if you return something bought on credit.
What we're watching: Whether lenders respond and whether states act on that data to press for tougher protections or regulatory reforms.