U.S. Senator Richard Blumenthal (D-CT) is warning holiday shoppers to be wary of so-called “buy now, pay later” (BNPL) plans.
He said the companies, such as Klarna and Afterpay, may end up charging customers more than they initially think.
“They advertise no interest,” Blumenthal said. “But in fact, consumers who miss payments or pay late will be slammed with huge fees. The four loan repayments have deadlines. If those deadlines are missed, there are huge fees that may cost consumers much more than ordinary credit would.”
Twenty percent of American consumers used BNPL plans this year, according to Blumenthal.
A proposed rule would have applied the Truth in Lending Act to BNPL companies. It was rescinded by the Trump administration earlier this year.
The rule would have made BNPL subject to the same disclosure requirements as credit card companies.
“So consumers are on their own,” Blumenthal said. “They use these plans at their peril, and I hope they will be careful about doing so.”
Blumenthal sent letters to the top seven BNPL companies asking for information he says he needs to assess the risk of the product. He said he expects responses by December 9.
