Affirm CEO sees ‘roadmap’ in CFPB’s Buy Now, Pay Later report (1)
The Consumer Financial Protection Bureau’s efforts to strengthen oversight of buy now, pay later financing will benefit the industry, said Max Levchin, CEO of Affirm.
The CFPB said in a report Thursday that it was looking at ways to bring consumer protections for credit card users to Buy-Now-Pay-Later (BNPL) products, which are typically installment loans. for purchases to be repaid in four equal instalments.
“I think there may be some soul-searching among competitors” in how they undertake technical efforts and hire compliance officers, said Levchin, who also founded Affirm, one of the largest providers of BNPL financing.
The 83-page report “creates expectations and sets a roadmap for the industry” that could lead to safer BNPL products, Levchin said. The report also highlighted the potential benefits offered by BNPL products, which generally do not charge interest.
The CFPB has also expressed concern that some BNPL companies are selling consumer data to third parties. Levchin noted that Affirm does not sell consumer data and only uses it for subscription purposes.
“We chose to do a lot of what the report asked for,” Levchin said in an interview with Bloomberg Law. “We have always viewed this as a lending activity subject to all lending rules and regulations.”
The CFPB is currently exploring ways to subject the largest providers of BNPL to direct scrutiny by the bureau’s review teams to ensure companies are complying with existing consumer protection laws. The CFPB reviews banks with more than $10 billion in assets, as well as other large payday lenders, debt collection companies and mortgage service companies.
Levchin said it’s too early to say whether Affirm supports the idea of a direct CFPB review.
He also said it was too early to say whether Affirm would volunteer to be supervised if other BNPL suppliers did not. But Affirm would be ready if the CFPB decided to require industry reviews, he said.
“We definitely have players in the industry who, in general, are pretty happy not to be watched. We’re not one of those,” Levchin said.
The CFPB said a single BNPL company does not charge late fees or other hidden fees and takes extra care with consumer data. Of the five major BNPL firms studied by the CFPB in its report, Affirm is the only one that does not charge late fees.
The highly anticipated report from the CFPB highlighted both the dramatic growth of the buy now, pay later industry since 2020, as well as some of the consumer protection issues that have arisen within it.
CFPB director Rohit Chopra said in a statement that the office’s goal was to make BNPL’s consumer protections more like those of credit card users, including improving dispute resolution. and return protections; Truth in Lending Act Disclosures; and late fee limits.
The bureau is also looking to change how companies handle consumer data, including limiting sales of user data without consumer permission.
Shares of BNPL companies, including Affirm, have fallen in recent months as the Federal Reserve raises interest rates and recession fears lurk.