ABA Emphasizes Need for Consumer Protection on Fintech ‘Buy Now, Pay Later’ Products

In a statement for the record submitted for a House Financial Services Fintech Task Force roundtable on “buy now, pay later” fintech products, the American Bankers Association emphasized that banks are committed to providing safe credit including through BNPL products “that have appropriate consumer protections.”

BNPL products—which have grown more popular in recent years, both in other countries and the U.S.—are not riskless products, ABA cautioned, and lawmakers should consider whether there is a need for nonbank providers of the service to be subject to the same level of oversight as banks. While the service is often advertised as a substitute for credit cards, ABA noted that consumers have none of the protections that apply to credit card transactions, such as dispute rights, fraud protections and other claims and defenses provided under the Truth in Lending Act.

ABA also cited a recent survey that found that a third of BNPL users reported missing a payment and 72% of users stated that their credit scores declined after using the service. “It is crucial that BNPL providers be required to be transparent with consumers about the financial commitment they are making,” ABA said.