Buy now, pay later companies must adhere to credit card rules

Buy now, pay later companies must provide consumers with the same legal rights and protections as credit card lenders do, the Consumer Financial Protection Bureau said in a new rule. That includes the right to demand a refund and to dispute transactions. The agency began an inquiry into the short-term lending industry two years ago, and it issued the rule in response to ongoing consumer complaints, it said. Here's what you need to know.

Buy now, pay later loans are typically marketed as zero interest or low interest, and they allow consumers to spread out payments for purchases over several weeks or months. They’re marketed as a way to buy expensive products and services over time, and the service is typically offered at checkout for online shopping. It’s often used for big-ticket items such as furniture, clothes and airline tickets.

The CFPB said that buy now, pay later lenders need to extend many of the same rights and protections as classic credit card providers. “Importantly, these cover dispute and refund rights,” the agency said. The agency clarified that, with its new rule, buy now, pay later lenders must: Investigate disputes. Lenders must also pause payment requirements during the investigation and sometimes must issue credits. Issue refunds for returned products or canceled services.

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