Buy Now, Pay Later: Difference between revisions

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==How it works==

When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest ~~if you're unable to pay it~~), account fund freezes, or in worst case scenarios, ~~being~~ sent to a debt collector which can affect ~~your~~ credit score.

When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest), account fund freezes, or in worst-case scenarios, is sent to a debt collector which can affect the customer's credit score.

==Why it is a problem==

===Lack of regulation===

~~BNPL~~'s short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that ~~these~~ BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.

Buy Now, Pay Later's short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that many BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.

===Ease of debt===

Many credit lenders offer soft credit checks and low interest rates to entice un-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of ~~gatekeeping~~ from hard credit checks and interest rates means that more consumers are accruing easily ~~avoided~~ debt.

Many credit lenders offer soft credit checks and low interest rates to entice non-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of safeguards that come from hard credit checks and interest rates means that more consumers are accruing easily avoidable debt.

===No safeguards===

Credit card companies ~~generally~~ report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, BNPL services as a safer option compared to traditional credit cards.

Credit card companies are legally obligated to report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, that BNPL services are a safer option compared to traditional credit cards.

== Regulations ==

==Regulations==

The prevalence of Buy Now, Pay Later loans has been most notable since the COVID pandemic in 2020, a time where people had done a lot of shopping online at home{{Citation needed}}. Because of this recent ~~timeframe~~, legislation has been slow to mitigate the widespread effects. Most countries simply tacked BNPL services to pre-existing banking laws, but this has left many gaps in how the service is regulated.

The prevalence of Buy Now, Pay Later loans has been most notable since the COVID pandemic in 2020, a time where people had done a lot of shopping online at home{{Citation needed}}. Because of this recent time-frame, legislation has been slow to mitigate the widespread effects. Most countries simply tacked BNPL services onto pre-existing banking laws, but this has left many gaps in how the service is regulated.

=== United States ===

===United States===

=== New York's ''Buy Now, Pay Later'' Act ===

===New York's ''Buy Now, Pay Later'' Act===

==Examples==

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 ==How it works==
-When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest if you're unable to pay it), account fund freezes, or in worst case scenarios, being sent to a debt collector which can affect your credit score.
+When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest), account fund freezes, or in worst-case scenarios, is sent to a debt collector which can affect the customer's credit score.
 ==Why it is a problem==
 ===Lack of regulation===
-BNPL's short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that these BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.
+Buy Now, Pay Later's short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that many BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.
 ===Ease of debt===
-Many credit lenders offer soft credit checks and low interest rates to entice un-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of gatekeeping from hard credit checks and interest rates means that more consumers are accruing easily avoided debt.
+Many credit lenders offer soft credit checks and low interest rates to entice non-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of safeguards that come from hard credit checks and interest rates means that more consumers are accruing easily avoidable debt.
 ===No safeguards===
-Credit card companies generally report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, BNPL services as a safer option compared to traditional credit cards.
+Credit card companies are legally obligated to report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, that BNPL services are a safer option compared to traditional credit cards.
-== Regulations ==
+==Regulations==
-The prevalence of Buy Now, Pay Later loans has been most notable since the COVID pandemic in 2020, a time where people had done a lot of shopping online at home{{Citation needed}}. Because of this recent timeframe, legislation has been slow to mitigate the widespread effects. Most countries simply tacked BNPL services to pre-existing banking laws, but this has left many gaps in how the service is regulated.
+The prevalence of Buy Now, Pay Later loans has been most notable since the COVID pandemic in 2020, a time where people had done a lot of shopping online at home{{Citation needed}}. Because of this recent time-frame, legislation has been slow to mitigate the widespread effects. Most countries simply tacked BNPL services onto pre-existing banking laws, but this has left many gaps in how the service is regulated.
-=== United States ===
+===United States===
-=== New York's ''Buy Now, Pay Later'' Act ===
+===New York's ''Buy Now, Pay Later'' Act===
 ==Examples==