The Consumer Financial Protection Bureau said Thursday (Dec. 16) it wants details from several high-profile buy now, pay later (BNPL) firms — Affirm, Afterpay, Klarna, PayPal and Zip — regarding the pros and cons of flexible payment options, according to a CNBC report Friday (Dec. 17).
The launch of the investigation led stocks in the quintet of BNPL agencies to tumble sharply. The CFPB probe is focused largely on consumers’ ability to quickly accumulate BNPL debt, the lack of regulations on the sector and data collection.
Affirm’s shares closed down 11% Thursday as the CFPB investigation launched. Australian companies Afterpay, Zip and Sezzle dropped 8%, 6% and 10% on Friday, respectively.
After seeing the success of Affirm, Afterpay and Klarna, PayPal debuted its own BNPL offering late last year. Block, the company that was formerly known as Square, has a $29 billion agreement in place to acquire Afterpay.
Afterpay shares are down more than 30% since the start of 2021, and Zip has plunged 25% in that time. Sezzle’s stock price is down more than 50% since January. Affirm has remained strong since its launch at the beginning of this year.
The U.K. government, meanwhile, is also planning to introduce BNPL regulations, putting the companies under the auspices of the Financial Conduct Authority, which regulates financial services firms. The Britain Treasury Department is working with BNPL companies on its legislation, saying the research will end Jan. 6.
Related: CFPB Probes Big Five Buy Now, Pay Later Providers Over Data Use, Debt Accumulation
Affirm, Afterpay, Klarna, PayPal and Zip have until March 1, 2022, to gather detailed information about consumers’ shopping behavior, fees, loan performance, users’ demographics, data collection and other elements of their business models, according to the CFPB edict.
“Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too,” said CFPB Director Rohit Chopra.
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