Buy Now, Pay Later Protection Act of 2025

Mr. President, today I am joined by Senators Van Hollen, Blumenthal, and Gillibrand, in introducing the Buy Now, Pay Later Protection Act. This bill will extend key consumer protections for traditional credit cards to ``buy now, pay later,'' BNPL, loans. These include standardized disclosures, periodic account statements, chargeback rights, billing error rights, and a prohibition on surprise fees.

The typical ``pay-in-four'' BNPL loan allows consumers to purchase a product and then pay back the loan over four equal installments, with the first installment akin to a downpayment. BNPL typically does not charge interest, but it does charge late fees. The lenders make their money primarily by charging merchants. When BNPL is offered as an option at check-out, consumers are more likely to complete a purchase and tend to spend more money.

In the mid-2010s, BNPL became a popular alternative to credit cards for online retail purchases, particularly among younger consumers. Its popularity soared during the pandemic, as more consumers turned to online shopping. Growth since then has been explosive. According to data from the CFPB and Adobe Analytics, BNPL credit totaled an estimated $2 billion in 2019 and is expected to be around $120 billion this year. Around 15 percent of Americans have used BNPL in the past year--that's is around 90 million people.

When used responsibly, BNPL can be an important source of credit for those who are weary of credit cards. If they are well-designed, transparent, accountable, and supervised, BNPL products can legitimately help these Americans meet their need for credit. In fact, the typical BNPL user is a lower income borrower who wants to spread out payments over time without incurring interest.

Given the huge growth in this market in only a few short years, it is critical to review when the laws governing these products must be updated. It should be uncontroversial for BNPL borrowers to receive many of the basic protections that credit card holders currently have, but they currently lack any of these protections because existing laws were not drafted with BNPL products in mind. This has resulted in gaps and uncertainty for BNPL users.

The commonsense protections in the BNPL Protection Act include clear information on due dates, fees, and how to dispute charges. The bill requires BNPL lenders to issue periodic account statements. It provides consumers with a right to seek a chargeback when they are victims of fraud or deception, so that they don't keep getting charged if they don't get what they paid for. They also prohibit the credit reporting bureaus and debt collectors from going after a consumer when they dispute a transaction, so that borrowers are not penalized or harassed into repaying debt they may not owe. The CFPB had these protections in place until the current Acting Director rescinded them earlier this year.

These protections are crucial now because BNPL delinquencies and defaults have been on the rise. Nearly 25 percent of BNPL users made late payments, which is a sharp increase over prior years, in many cases resulting in significant late fees even on relatively small- dollar loans. BNPL users do seem to be struggling to an even greater degree than credit card holders. According to Bloomberg, 43 percent of those who owe money to BNPL services said they were behind on payments, and 28 percent said they were delinquent on other debt because of BNPL spending. Indeed, the Federal Reserve Bank of New York found that ``a disproportionate share of BNPL users are already financially fragile'' and that while BNPL may deliver benefits to lower income consumers, ``BNPL may attract consumers who already have financial difficulties and are struggling to pay their existing bills and debt payments.''

In short, this bill will preserve the availability of BNPL credit while helping consumers avoid hidden fees, better manage their finances, and have more transparency into the terms and conditions of their loans. It will clarify the regulatory status of BNPL loans to match how consumers are using this new product.

Finally, this bill will require the CFPB to begin supervising BNPL providers in order to spot violations before they snowball. BNPL providers are not currently subject to compulsory Federal supervision by the CFPB. Rather, they may be subject to supervision only by the States in which they do business. Some States require registration and conduct examinations, while others do not. This system may allow potential violations of consumer protection laws to fall through the cracks, leaving consumers exposed to harm and limiting accountability for BNPL providers who don't play by the rules.

I thank the supporters of this legislation, including the National Consumer Law Center, on behalf of its low-income clients, Americans for Financial Reform, and the Consumer Federation of America.

I urge my colleagues to join in supporting this important legislation.

Mr. President, today I am joined by Senators Van Hollen, Blumenthal, and Gillibrand, in introducing the Buy Now, Pay Later Protection Act. This bill will extend key consumer protections for traditional credit cards to ``buy now, pay later,'' BNPL, loans. These include standardized disclosures, periodic account statements, chargeback rights, billing error rights, and a prohibition on surprise fees.

The typical ``pay-in-four'' BNPL loan allows consumers to purchase a product and then pay back the loan over four equal installments, with the first installment akin to a downpayment. BNPL typically does not charge interest, but it does charge late fees. The lenders make their money primarily by charging merchants. When BNPL is offered as an option at check-out, consumers are more likely to complete a purchase and tend to spend more money.

In the mid-2010s, BNPL became a popular alternative to credit cards for online retail purchases, particularly among younger consumers. Its popularity soared during the pandemic, as more consumers turned to online shopping. Growth since then has been explosive. According to data from the CFPB and Adobe Analytics, BNPL credit totaled an estimated $2 billion in 2019 and is expected to be around $120 billion this year. Around 15 percent of Americans have used BNPL in the past year--that's is around 90 million people.

When used responsibly, BNPL can be an important source of credit for those who are weary of credit cards. If they are well-designed, transparent, accountable, and supervised, BNPL products can legitimately help these Americans meet their need for credit. In fact, the typical BNPL user is a lower income borrower who wants to spread out payments over time without incurring interest.

Given the huge growth in this market in only a few short years, it is critical to review when the laws governing these products must be updated. It should be uncontroversial for BNPL borrowers to receive many of the basic protections that credit card holders currently have, but they currently lack any of these protections because existing laws were not drafted with BNPL products in mind. This has resulted in gaps and uncertainty for BNPL users.

The commonsense protections in the BNPL Protection Act include clear information on due dates, fees, and how to dispute charges. The bill requires BNPL lenders to issue periodic account statements. It provides consumers with a right to seek a chargeback when they are victims of fraud or deception, so that they don't keep getting charged if they don't get what they paid for. They also prohibit the credit reporting bureaus and debt collectors from going after a consumer when they dispute a transaction, so that borrowers are not penalized or harassed into repaying debt they may not owe. The CFPB had these protections in place until the current Acting Director rescinded them earlier this year.

These protections are crucial now because BNPL delinquencies and defaults have been on the rise. Nearly 25 percent of BNPL users made late payments, which is a sharp increase over prior years, in many cases resulting in significant late fees even on relatively small- dollar loans. BNPL users do seem to be struggling to an even greater degree than credit card holders. According to Bloomberg, 43 percent of those who owe money to BNPL services said they were behind on payments, and 28 percent said they were delinquent on other debt because of BNPL spending. Indeed, the Federal Reserve Bank of New York found that ``a disproportionate share of BNPL users are already financially fragile'' and that while BNPL may deliver benefits to lower income consumers, ``BNPL may attract consumers who already have financial difficulties and are struggling to pay their existing bills and debt payments.''

In short, this bill will preserve the availability of BNPL credit while helping consumers avoid hidden fees, better manage their finances, and have more transparency into the terms and conditions of their loans. It will clarify the regulatory status of BNPL loans to match how consumers are using this new product.

Finally, this bill will require the CFPB to begin supervising BNPL providers in order to spot violations before they snowball. BNPL providers are not currently subject to compulsory Federal supervision by the CFPB. Rather, they may be subject to supervision only by the States in which they do business. Some States require registration and conduct examinations, while others do not. This system may allow potential violations of consumer protection laws to fall through the cracks, leaving consumers exposed to harm and limiting accountability for BNPL providers who don't play by the rules.

I thank the supporters of this legislation, including the National Consumer Law Center, on behalf of its low-income clients, Americans for Financial Reform, and the Consumer Federation of America.

I urge my colleagues to join in supporting this important legislation.