Buy Now Pay later schemes are catching the eye of consumers, and of federal regulators

theguardian.com:

It is a shopper’s dream. A $250 coat can be bought for $50, hundreds of dollars of makeup can be sent to your door for just $20. The catch: you will eventually have to pay the full price of the purchase. But for now, only a fraction has to come out of your bank account.

So goes the enticing nature of Buy Now, Pay Later (BNPL), the payment method that allows consumers to pay for their purchases in installments, largely without interest. But the multi-billion-dollar trend has government officials – and even some consumers – worried.

The benefit to consumers is hazier. Consumers report a complicated relationship with BNPL companies, one that is often characterized by an instant high off a purchase, followed by a comedown once the payments are deducted from their paycheck every few weeks.

“Emotionally, when I get the package, I’m pretty happy,” said Sandra Lopez, 21, who lives in Atlanta. “Then it gets really stressful because you forget about the purchases. They come back at you. Once it’s payday, you’re again broke because you just feel like you don’t have any money … It’s not healthy.”

Lopez said she has accumulated $400 in purchases from Klarna, a Swedish finance company that is one of the leaders in BNPL. Lopez said those were largely impulse buys, and that it is easy to lose control when using BNPL, especially when companies offer enticing deals like free $5 gift cards to consumers.

“I know I’m making the purchases, but it’s also enabled my reach to even buy those items. Most of these items I wouldn’t be able to purchase with my credit card,” she said.

Nearly every major US retailer is now offering some type of BNPL service to its customers, a change seen only within the last three years. Since 2019, BNPL has grown 300% in