US Banking Regulator Warns on Risks of ‘Buy Now, Pay Later’

A prime U.S. banking regulator on Wednesday warned banks to handle the dangers to shoppers posed by more and more widespread “purchase now, pay later” financing for retail spending, saying the service creates pitfalls for retail buyers.

Because the year-end holidays strategy, the assertion from the US Workplace of the Comptroller of the Foreign money, an impartial arm of the US Treasury, was the newest signal that federal regulators are scrutinising the more and more widespread type of shopper credit score.

The loans permit debtors to repay a purchase order in 4 or fewer interest-free installments however regulators warn they’ll result in hassle, leaving unsuspecting debtors overextended.

“Because the ‘purchase now, pay later’ market grows and we enter the vacation procuring season, the steering confirms our expectation that OCC-supervised establishments providing these merchandise achieve this in a accountable method,” Michael Hsu, appearing Comptroller of the Foreign money, mentioned in a press release.

Customers with fewer {dollars} to spend are more and more turning to “purchase now, pay later” loans, with a file quantity borrowing almost $1 billion this fashion in the course of the annual Cyber Monday procuring spree alone, analysts say. The surge in enterprise has boosted shares in “purchase now, pay later” firm Affirm.

By Douglas Gillison

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