Buy Now Pay Later services like Klarna and Affirm are becoming a popular way to pay, offering little to no interest, smaller payments, and immediate access to items.
However, more people are falling into debt traps as federal rules to protect consumers remain on hold.
It is a quick way to get big-ticket items, and consumers can buy almost anything using BNPL.
"I mean you can buy airline tickets now on Buy Now Pay Later, just to go on vacation," Teresa Murray with the Public Interest Research Group said.
Murray said these transactions are hurting many consumers in the end.
"So many times people's eyes are bigger than their stomach, and they sign up for all these BNPL transactions, they don't keep track of them properly... you get hit with overdraft fees, interest piled on, and a lot of times it just doesn't go well," Murray said.
When Affirm would not refund his money, he reached out for help. I was able to get Robin his full refund after proving to the company that the festival was indeed canceled.
But being unable to get a refund is a common problem with these loans, along with overspending, missing payments, and purchase regret.
Despite these frequent issues, the Consumer Financial Protection Bureau is not enforcing new consumer protection rules. However, Congress is considering a bill. If passed, the proposed BNPL Protection Act would extend credit card protections to these loans.
For right now, it is a buyer-beware situation.
"You can sign up for BNPL transactions, but the company doesn’t check to see if you can afford it, that’s up to you," Murray said.
If you want to use these loans, here are a few tips to avoid the financial pitfalls:
- Do not get caught up in the ability to spend. Ask yourself if you can delay the purchase until you have the money.
- Understand the terms and conditions of the loan; that means read the fine print carefully.
- Keep sufficient funds in your account to cover your payments to avoid overdraft fees.
- You are not always guaranteed a refund. It is not as easy to take the product back to the store because any refund comes from the BNPL company, not the store.
Need more information and protection, check out PIRG's research about BNPL.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
