More Consumers Using BNPL For Everyday Purchases, Sending Up Red Flags

More consumers are using Buy Now, Pay Later offerings for everyday expenses and necessities like food and gas, leading consumer advocates and economists to worry about the state of the economy and the lack of insight into just how much debt consumers are taking on, likening the product to the “Wild West” with few checks and balances.

The product allows consumers to go into debt — splitting a purchase into four equal installments — without realizing it, and the lower payments may lead consumers to underestimate just how much they are paying when buying goods and services.

Consumers face the risk of stacking multiple Buy Now, Pay Later purchases on top of one another, leading them to have problem making payments on subsequent installments. While the credit reporting agencies and the Consumer Financial Protection Bureau are moving to regulate the Buy Now, Pay Later space, the fear is that “any potential fixes may not come quickly enough,” according to one published report.

Consumers are making Buy Now, Pay Later purchases because they don’t have credit scores strong enough to be approved for credit cards and are making purchases that don’t fit into their budgets, according to the reports. Now that people are making everyday purchases using Buy Now, Pay Later options, it’s a “problem” for consumers and for the economy.

“They’re buying cleaning supplies, they’re buying socks, they’re buying sneakers, they’re buying everyday household items,” said Marshall Lux, the former Chief Risk Officer at JPMorgan Chase and now a Harvard Kennedy School research fellow who authored a recent study on Buy Now, Pay Later. “When people start revolving everyday purchases like groceries, you know there’s a problem.”

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