Attorney General Dana Nessel joined a coalition of 19 attorneys general in urging the Consumer Financial Protection Bureau (CFPB) to ensure that buy-now-pay-later (BNPL) lenders are not engaging in practices that trap consumers in a cycle of debt.
BNPL loans are a form of point-of-sale financing that allow consumers to divide the cost of purchases into multiple installments.
The CFPB launched an inquiry into BNPL lenders and practices in 2021 and directed BNPL lenders to provide data related to lending and financing services. As part of its inquiry, the CFPB is seeking input from attorneys general.
In their comments, the attorneys general call on the CFPB to prioritize robust consumer protections during its review of the BNPL loan industry. The coalition is concerned that by touting quick credit application approvals and convenient, flexible payment schedules, BNPL loans and services are particularly appealing to borrowers already struggling with debt or younger borrowers who lack experience with credit.
The attorneys general also point out that, similar to predatory lending products, BNPL loans may contain terms and features that are known to trap people in cycles of debt.
“These kinds of loans may have the effect of pushing those already struggling financially into a quicksand of debt that only worsens their situation,” Nessel said. “Protecting Michiganders is my top priority, so I’m happy to join the other states in urging the CFPB to put buy-now-pay-later lenders under greater scrutiny to protect consumers.”
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