I-TEAM: Government taking a look at ‘Buy Now Pay Later’ options for online shoppers

I-TEAM: Government looking at buy now pay later programs
Published: Mar. 22, 2023 at 5:54 PM EDT
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(WFSB) - Online shopping continues to evolve. More and more, you can buy what you want and you don’t even have to pay for the whole thing upfront. The government is now taking a closer look at these options called “Buy Now Pay Later” or BNPL.

Ngoc Pham is the co-owner of Tee’s Boutique. The shop is located in Hartford, but about half of her sales comes from her online store. A third of her online customers use ShopPay.

“It’s just easier for most people nowadays,” said Pham.

An installment plan is considered a BNPL plan if there are four or fewer payments, usually paid every 2 weeks with no interest.

When there are 4 or fewer payments, the plan is not regulated by the government.

Senator Richard Blumenthal has called this a form of “creeping shadow credit.”

Blumenthal thinks the government should come up with rules and regulations for BNPL companies.

For now, Quinnipiac professor of entrepreneurship and strategy Patrice Luoma advises people to think carefully before choosing one of these options.

While there’s no interest, when you read the fine print there are often late fees. Automatic withdrawals can also lead to overdraft fees.

“It has to be repaid. These types of loans have a high default rate,” said Luoma.

The Consumer Financial Protection Bureau released a study this month about who is most likely to shop this way. The study found people using BNPL are most likely under 35. Their annual income is most likely between $20,000 and $50,000 dollars.

On average BNPL users are much more likely to already be in debt and have low credit scores. The study says more research needs to be done to determine if BNPL makes financial distress worse or if it gives those already in distress more options.

Pham says she’s personally bought using BNPL, and she’s never had any problems. When she shops, she makes sure to make her payments on time. She thinks additional regulations could hurt her business.

“I feel like it’s important because people don’t just have that type of money right now, especially after COVID and a lot of businesses closing,” said Pham.

BNPL is kind of like the 21st century kind of layaway, but this form comes with fees if you miss a payment.

Who is using buy now, pay later programs?