Apple Pay Later raises concerns over lack of BNPL regulation, says CFPB

The Consumer Financial Protection Bureau (CFPB) has expressed concern about the impact Apple’s entry into the buy now, pay later (BNPL) space could have on competition and how the big carrier technology will use consumer data. (istock)

Apple’s plan to expand its buy now, pay later (BNPL) fintech footprint with its Apple Pay Later product has the Consumer Financial Protection Bureau (CFPB) concerned about the impact that the entry of big tech will have on space.

Regulators’ main concern is how Apple and other large fintech companies seeking to offer BNPL services would use customer data, CFPB Director Rohit Chopra said in an interview with the FinancialTimes. The bureau is also examining how Apple’s BNPL game could reduce competition and innovation in the BNPL industry. He added that as big players like Apple enter the space, the American tradition of putting up a barrier between banking and commerce has become “more and more obscure”.

These concerns are also central of a report the office recently released.

“Big Tech’s ambitions when it comes to buy now, pay later are inextricably linked to the desire to dominate the digital wallet,” Chopra said in the interview. “Any tech giant that has a lot of control over a mobile operating system is going to have unique advantages for leveraging data and e-commerce more broadly.”

Apple announced its new service, Apple Pay Later, at its 2022 Worldwide Developers Conference. The service allows users to split the cost of their purchases into four interest-free installments anywhere Apply Pay is accepted. The new buy now, pay later (BNPL) option will be available in the wallet app when Apple releases iOS 16 in September. The company said the offer would require a “soft” credit check and a review of the user’s transaction history with Apple.

Looking to finance a major purchase but don’t want to use BNPL? A personal loan could be a good alternative. You can visit Credible to compare personal loan rates and lenders and find the option that’s right for you.

BNPL’S INCLUSION IN CREDIT REPORTS CAUSES INCREASING CONSUMER CONCERNS AND INVESTIGATIVE CLAIMS

Calls for BNPL regulation intensify

BNPL’s suppliers partner with retailers to allow shoppers to split the cost of their online purchases into installments at checkout. Part of the appeal is that installment payments, which typically begin a few weeks after purchase, are interest-free. However, missed payments may result in late fees and other penalties.

There is currently no regulatory framework at the federal level specifically designed for the BNPL sector, which grew to $120 billion globally in 2021, according to a GlobalData report.

As interest in the financial product intensifies, calls for more regulations. last decemberChopra requested information on industry practices and risks from Affirm, Afterpay, Klarna, PayPal and Zip, all of which are BNPL companies.

And in March, several state attorneys general sent a joint letter to Chopra, urging the CFPB to take a closer look at BNPL’s policies and practices.

“Innovative financial products promise to democratize the financial industry, but their shiny new packaging may hide many of the same characteristics of predatory lending that have long pushed consumers into an endless cycle of debt,” the California attorney general said. , Rob Bonta. “The fact is that the Buy-Now-Pay-Later industry is largely unregulated, and we need the CFPB to take a close look at these financial products and take action to prevent vulnerable consumers from being taken advantage of. .”

If you need help paying for a large purchase and don’t want to use BNPL, you might consider taking out a personal loan. Visit Credible to find your personalized interest rate without affecting your credit score.

APPLE’S CONSUMER DATA PROVIDES ‘COMPETITIVE ADVANTAGE’ TO BNPL, EXPERT SAYS

BNPL space affected by layoffs

In addition to facing a potentially more difficult regulatory environment, BNPL providers have not been immune to recent economic challenges. In May, Klarna said he fired 10% of its global workforce and, a few months later in July, its co-founder and CEO tweeted that the company had raised funds at a significantly lower valuation. Affirm, which went public last year, also saw its shares fall 75% year-over-year in June, according to Business Intern.

However, it appears that investor sentiment on the BNPL space has not dampened how consumers are using the product. A Morning consultation report of July said the number of American adults who used BNPL at least once a month had not fallen below 16% in 2022. And since June 2021, the number of consumers who considered buying with Affirm and Afterpay grew by 4 percentage points each, while Klarna was flat at 11%. PayPal’s BNPL product has also maintained purchase consideration among about 18% of adults since its release in November 2021, according to the report.

“Industry leaders should expect BNPL buying to remain stable even as consumer spending power and the economic outlook deteriorate,” said Charlotte Principato, financial services analyst for Morning Consult, in the report. “In addition to the current macroeconomic headwinds, there are significant tailwinds that will support the payment method through the summer and beyond, towards a permanent place in consumers’ wallets.”

If you’ve taken on too much BNPL debt, you might consider using a debt consolidation loan to help you pay it off. You can visit Credible to compare several personal lenders at once and choose the one with the best interest rate for you.

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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