The main screen of the Affirm Holdings Inc website. on a laptop computer in a photo arrangement taken in Little Falls, New Jersey.
Gabby Jones | Bloomberg | beautiful pictures
“Buy Now, Pay Later” shares fell on Thursday after the Consumer Financial Protection Bureau released a report that said it was seeking more scrutiny of these companies.
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The Consumer Watchdog, which does not currently regulate the sector, plans to issue guidance aimed at promoting these companies to the same standards like credit card companies – including supervisory exams.
The news came less than a year after CFPB says it’s opened an investigation into five major purchases right now, paying players later to gather information about the risks associated with common loans and their impact on debt accumulation. The team includes PayPal, Block, Affirm, Klarna and is based in Australia Zip.
The buy now, pay later model – which allows consumers to make short-term installments that usually don’t charge interest on purchases – has come under pressure in recent months as consumers slow to spend and regulatory pressure mounts. One Recession will pose more risks for these fintech businesses.
Data from the CFPB report shows that buy now, pay later loans in the US skyrocketed 970% from 2019 to 2021, to 180 million transactions among the five major lenders, with the value of That loan increased 1.092% to $24.2 billion.
But as this model became wildly popular during the pandemic, so did late fees, the CFPB said. In 2021, 10.5% of users incur at least one late fee, up from 7.9% in 2020.
Shares of Affirm, PayPal and Block have fallen more than 48% this year amid a broader market sell-off and are down at least 65% from their 52-week highs.