RALEIGH – Today, Attorney General Jeff Jackson led seven attorneys general in sending letters to the six largest buy-now-pay-later (BNPL) providers (Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip) to determine if they are placing North Carolinians at financial risk or violating consumer protection laws.
“Buy-Now-Pay-Later loans may seem simple and safe, but they can lead to surprise fees and growing debt,” said Attorney General Jeff Jackson. “Laws exist to protect North Carolinians from predatory lenders, and we are going to make sure these lenders are following the law.”
BNPL loans let customers split the cost of a purchase into several payments instead of paying all at once. But there are risks. This industry has grown fast, and people are now using these loans for many everyday purchases, like clothes, groceries, and event tickets. People are increasingly relying on BNPL loans and may end up with serious debt and unexpected fees. According to recent studies, 20 percent of consumers used a BNPL loan for a purchase in 2023 and surveys show that approximately one in four of these consumers have missed payments on their BNPL loans, potentially triggering high late fees.
In 2022, North Carolina joined a group of attorneys general urging the federal government to create rules for the BNPL industry. They highlighted concerns that these loans, which promise fast approvals and flexible payments, can be especially risky for people already struggling with debt and for younger borrowers who do not have experience with credit. Like other high-risk lending products, BNPL loans can include terms that make it easy for borrowers to fall into a cycle of debt. The terms of the loans typically include imposing late fees and reporting missed or late payments to credit bureaus, which can increase a borrower’s debt and costs over time.
As part of this inquiry, Attorney General Jackson is asking BNPL companies to explain how they assess a consumer’s ability to repay these loans and to provide details about their billing practices, late fees, and how they handle disputed charges.
Joining Attorney General Jackson in sending today’s letter to the BNPL providers are the attorneys general of California, Connecticut, Colorado, Illinois, Minnesota, and Wisconsin.
More consumers use BNPL loans during the holidays, when they are making more high-priced purchases. Here are some tips to help avoid falling into a cycle of debt caused by predator BNPL lenders.
- Avoid using BNPL if you can pay for the entire purchase in full.
- Consider alternative options such as credit cards or other loans, which may be more manageable over time and have better procedures for resolving disputes.
- Make sure you understand the terms of the loan, including any late fees, subscription fees, or other fees.
- Monitor the activity on your account for any billing errors or unauthorized charges.
- Carefully track your BNPL loan payment due dates so that the payments don’t come as a surprise.
Report any issues with BNPL lenders to NCDOJ’s Consumer Protection Division at ncdoj.gov/complaint or call 1-877-5-NO-SCAM.
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