Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

Consumer Reports Urges the CFPB to Strengthen Oversight and Consumer Protections for “Buy Now Pay Later” Loans

CR Calls For New Rules to Ensure Consumers Are Treated Fairly And Can Afford to Manage Their Payments

WASHINGTON, D.C. – In a comment letter submitted to the Consumer Financial Protection Bureau today, Consumer Reports highlighted some of the potential risks consumers face with Buy Now Pay Later (BNPL) loans and called for stricter oversight of providers. The CFPB is currently evaluating the burgeoning BNPL market, which has exploded in recent years but is largely unregulated. 

Buy Now Pay Later products are designed to provide consumers with point-of-sale loans, typically issued at 0% interest, typically to be paid back within four payments over two months. Providers such as Afterpay, Klarna, Zip, Paypal, and Sezzle make money on the loans by charging businesses a fee when consumers use BNPL, and by assessing late fees when consumers miss a payment.

 “Buy Now Pay Later (BNPL) products have become an increasingly popular and convenient way for consumers to delay payments and manage their expenses,” said Chuck Bell, advocacy program director for CR. “But these loans also pose risks that can result in unexpected costs and frustration, especially when consumers fall behind on payments or have a dispute over an unwanted or fraudulent purchase. We need stricter oversight of Buy Now Pay Later services so that consumers who rely on them are treated fairly and get the same protections that come with other forms of credit.”

CR’s letter to the CFPB highlights a number of concerns about Buy Now Pay Later programs, including confusing and unclear disclosure agreements, high and excessive fees for missed payments, and problems consumers encounter getting a refund or resolving disputes over purchases.     

While Buy Now Pay Later programs serve as a form of credit, Consumer Reports’ letter points out that providers are not required to evaluate a user’s ability to repay.  Because borrowers may take out multiple BNPL loans, they can become overextended and fall behind on payments. CR cites research finding that BNPL users have a higher rate of incurring overdraft fees compared to other consumers, which raises concerns that they may tend to be overextended on credit payments and household expenses and have a harder time avoiding penalty fees. 

Because BNPL products lack billing, disclosure and error correction protections provided under the Truth in Lending Act, consumers may not be able to find basic information regarding interest rates, due dates for payments, late fees, and how these loans may impact their credit record.

Many consumers have reported difficulties making returns and receiving refunds for BNPL payments they’ve made for goods and services.  While the problem may be less serious at larger retailers, consumers who use BNPL with smaller companies or less reputable websites may encounter this problem more frequently.

Consumer Reports urged the CFPB to adopt a number of reforms to better protect consumers, including:  

  • Subject BNPL loans to the same underwriting standards for credit cards and other regulated loans, including an ability to repay standard that considers the borrower’s income, and expenses and obligations.  
  • Create standardized disclosures to make sure customers can easily find all the information they need about interest rates, terms and fees, so they can compare products more effectively.
  • Establish a public monitoring system to ensure that returns, refund requests and other customer inquiries and complaints are processed in a timely way.


In addition, Consumer Reports is calling on Congress to extend “chargeback rights” to BNPL loans, so consumers have a legal right to challenge charges for goods that were defective, or never shipped or delivered, similar to the rights consumers currently have for credit cards.

See Consumer Reports’ letter for a more detailed explanation of CR’s concerns and policy recommendations.