What the new “Buy now, pay later” rule means for small businesses offering this service

NEW YORK | “Buy now, pay later” services are a popular way for buyers to pay for their goods.

The payment plan is typically marketed as zero- or low-interest and allows consumers to spread payments for their purchases over several weeks or months.

Because buyers like this service, offering it can be a plus for a small business. But because the payment plan is offered by third-party companies – such as Affirm and Klarna – it can also carry risks.

If something goes wrong, consumers might blame the small business, even if they had nothing to do with the payment plan. And things can go wrong. A 2022 Consumer Financial Protection Bureau report found that more than 13% of BNPL transactions involved a disputed charge or return. In 2021, consumers disputed or returned $1.8 billion in transactions with five major BNPL companies, the CFPB said.

The plans also cost small businesses money — typically a 1 to 3 percent fee, which can add up when margins are tight.

But the CFPB has issued a new rule that could placate small business owners. The agency said “buy now, pay later” companies must offer consumers the same legal rights and protections as credit card lenders.

This means consumers have legal protections, including the right to dispute charges, easily obtain a refund directly from the lender for a returned item, and obtain billing statements.

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