‘Regulation is needed;’ New rules could make Buy Now Pay Later apps work more like credit cards

There are new rules for Buy Now Pay Later apps that would make them work more like credit cards.

As reported on News Center 7 at 5:00 p.m., the Consumer Financial Protection Bureau is making moves to make “Pay-in-installment” options have some of the same protections as credit cards.

Buy Now Pay Later Apps like Affirm, Klarna, and Afterpay have skyrocketed in popularity.

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“By now pay later is not as regulated as credit cards,” Ted Rossman, Senior Industry Analyst with Bankrate said.

But now, the Consumer Financial Protection Bureau is working to change that.

They issued a new rule that would make these buy now, pay later options have some of the same protection as credit cards.

The new rule includes the right to dispute charges, and the right to a refund after returning a product.

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“Returns are a pain point because there’s a middleman like sometimes you send an item back to a retailer, and the Buy Now Pay Later company is still asking for its cut. And it may not even realize,” Rossman said.

Bankrate has been looking into Buy Now Pay Later apps and found more than half of users have experienced at least one problem.

“I do think more regulation is needed here on a few fronts,” Rossman said.

The most common problems include spending too much, missing a payment, and issues with returns and refunds.

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“Credit reporting is another big hole. Most of these plans are not reporting to credit bureaus. Also using it responsibly doesn’t usually help you improve your credit score,” Rossman said.

Rossman says there can be perks to using these apps, but you must be careful.

“Don’t just kick the can down the road with these bi-weekly payments. It’s important to have a good plan,” Rossman said.

The New CFPB Rule also means Buy Now Pay Later apps must send your periodic billing statements like the ones you would get with a classic credit card.

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