Sen. Blumenthal warns consumers about buy now, pay later programs
(WFSB) - Buy now pay later.
It’s a trend happening right now in online shopping.
The companies promise 4 payments, interest free but Senator Richard Blumenthal is warning customers, it may be too good to be true this holiday season.
Companies like Klarna, After Pay, Affirm call it “a better way to shop.”
Buy now, pay later in 4 interest free payments.
“My parents definitely always told me, those things are almost always too good to be true, that’s why I’m a little hesitant,” says Lien La of New Britain.
Senator Richard Blumenthal says that’s exactly how consumers should feel.
“These buy now, pay later loans are a form of creeping shadow credit, without the safeguards or protection that apply to other kinds of loans that people use to buy stuff,” says Blumenthal.
Blumenthal says these plans often involve automatically charging your debit cards or bank accounts.
If you make the payments on time, great.
But if you don’t, those automatic charges could lead to overdraft fees, penalties and other hidden costs.
“This is an ad for Affirm. Pay over time on your terms, not really. It’s on their terms and failure to meet their terms results in fees and charges,” says Blumenthal.
“I’d rather just pay it off because otherwise I’d probably forget and end up getting an extra charge for missing a payment,” says Evelyn Kobialaa.
Calling it the Wild Wild West, Senator Blumenthal says these companies aren’t currently regulated by the government, because the Truth in Lending Act only goes into effect, if a company asks for 5 payments or more.
“We’re warning people that there are no safeguards here right now. You don’t get the ordinary protections you get with credit cards. You don’t get the safeguards that come with bank loans,” says Blumenthal.
He says these plans are soaring in popularity, encouraged by how online shopping grew during the pandemic.
Senator Blumenthal is asking the Consumer Financial Protection Board to come up with rules and regulations quickly, before consumers get lost in the temptation this holiday season.
“My advice to consumers is, know the terms. Make sure that you comply with the terms.” says Blumenthal.
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