The Consumer Financial Protection Bureau said it’s demanding information from the firms because it’s concerned that borrowers are accumulating debt and that consumers’ personal data could be misused.

PayPal Holdings Inc., Affirm Holdings Inc. and Afterpay Ltd. are among several companies being scrutinized by the U.S. Consumer Financial Protection Bureau over their policies of letting consumers buy products now, while paying for them later.

In a Thursday statement, the CFBP said it’s demanding information from the firms because it’s concerned that borrowers are accumulating debt, companies might be engaging in regulatory arbitrage and consumers’ personal data could be misused. The regulator said it’s also seeking responses from Klarna Bank AB and Zip.

“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,” CFPB Director Rohit Chopra said in the statement. The agency is requesting information so that it “can report to the public about industry practices and risks.” he added.

Currently, more than a quarter of Digital Commerce 360’s Top 1000 online retailers offer a BNPL payment option.


The consumer finance watchdog said it’s also working with the Federal Reserve, state officials and international regulators to address concerns about these types of financial technology companies. Since taking the helm of the CFPB in October, Chopra has made a priority of going after technology companies’ finance ambitions, and has previously launched a probe into Apple Inc, Facebook’s parent Meta Platforms Inc. and other giants to glean information about how they are using consumer data.

The nature of BNPL

Buy now, pay later services allows customers to split payments into installments, often interest-free. Earlier this year, Square — later renamed Block Inc. — announced plans to acquire Afterpay for $29 billion. PayPal has seen rapid growth of its own product. Consumer advocates worry the product could cause Americans to overextend their means and descend into debt.

Shares of the companies fell, with PayPal down 1%, Affirm dropping 11% and Block declining more than 4% at the close of trading in New York Thursday. Spokespeople for Affirm and Afterpay said they welcomed the CFPB’s review. A representative for PayPal did not respond to a request for comment.