Key Points
- Seven state attorneys general are investigating six major Buy Now, Pay Later companies.
- They are concerned that the services could be a “debt trap” for consumers, particularly during holiday shopping.
- The action follows the federal government’s reduction of oversight of the industry.
- The investigation targets major players like Klarna, Affirm, Afterpay, and PayPal.
A group of seven state attorneys general is demanding answers from major ‘Buy Now, Pay Later’ companies like Klarna, Affirm, and Afterpay, worried that these popular services could be trapping consumers in debt, especially during the holiday shopping season.
The officials sent letters to six of the industry’s biggest players on Cyber Monday, asking for detailed information on their loan structures, costs, and how they determine whether customers can afford to repay them. The states involved include Connecticut, California, Illinois, and North Carolina.
Connecticut Attorney General William Tong is leading the charge. He expressed concern that heavy marketing is luring shoppers into risky financial arrangements. “Buy now, pay later may appear to be a convenient way to afford a purchase,” Tong said, “but shoppers need to watch out for debt traps.”
The states are stepping in because they feel the federal government is stepping back. Tong directly blamed the Trump administration for rolling back a rule from the Consumer Financial Protection Bureau that treated many of these services like credit cards. “It’s up to states now to ensure shoppers know what they are getting into,” he said.
This investigation comes as the Buy Now, Pay Later industry is exploding, with transaction volumes expected to double to $687 billion by 2028. The officials want to know how these firms handle delinquencies, resolve customer disputes, and whether they are complying with federal lending laws.
