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Illinois Attorney General Kwame Raoul
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March 25, 2022


Chicago  —  Attorney General Kwame Raoul today led a coalition of 19 attorneys general in urging the Consumer Financial Protection Bureau (CFPB) to ensure that buy-now-pay-later (BNPL) lenders are not engaging in practices that trap consumers in a cycle of debt. BNPL loans are a form of point-of-sale financing that allow consumers to divide the cost of purchases into multiple installments. The CFPB launched an inquiry into BNPL lenders and practices in 2021 and directed BNPL lenders to provide data related to lending and financing services. As part of its inquiry, the CFPB is seeking input from attorneys general.

In comments submitted today, Attorney General Raoul and the attorneys general call on the CFPB to prioritize robust consumer protections during its review of the BNPL loan industry. Raoul and the coalition are concerned that by touting quick credit application approvals and convenient, flexible payment schedules, BNPL loans and services are particularly appealing to borrowers already struggling with debt or younger borrowers who lack experience with credit. Raoul and the attorneys general also point out that, similar to predatory lending products, BNPL loans may contain terms and features that are known to trap people in cycles of debt.

“Buy-now-pay-later loans can seem like an affordable option for consumers who wish to divide one purchase into multiple payments. While these loans may appear to make payments more manageable, they may also result in people accumulating debt and ultimately paying more,” Raoul said. “I appreciate the CFPB’s inquiry into this industry, and I encourage the agency to ensure companies are not utilizing practices that trap people into a cycle of debt.”

People use BNPL loans when purchasing a variety of goods and services, from clothing and household goods, to event tickets and electronics, to even online training courses. In recent years, the BNPL industry has experienced rapid and exponential growth, particularly during the COVID-19 pandemic as consumers have shopped online more frequently.

In their letter, Attorney General Raoul and the coalition express concern that some BNPL lenders may be designing their loans to evade federal and state consumer protection and credit laws, and may not adequately disclose lending and repayment terms. For instance, BNPL providers may not necessarily consider a borrower’s ability to repay loans before approving applications. In addition, while some BNPL providers do not charge regular fees or interest, most charge late fees and report late or missed payments to credit bureaus. As a result, borrowers may accumulate more debt and end up paying more when utilizing BNPL loans. In addition, Attorney General Raoul and the coalition recommend that the CFPB examine the means through which BNPL companies protect consumer privacy and collect, use and monetize consumer data.

Attorney General Raoul and the coalition also encourage the CFPB to look into apparent partnerships between BNPL companies and providers of unaccredited online courses. The attorneys general point to online courses, such as tech boot camps, that have established partnerships with non-bank lenders offering these new financial services. Raoul and the coalition point out that such services do not offer participants the same protections as those included in federal student loans, or even private student loans.

The Illinois Attorney General’s office has long been a national leader in investigating and enforcing consumer protection violations against predatory lenders. Raoul advocated for passage of the passage of the Predatory Loan Prevention Act that sets a 36% interest rate cap on all consumer loans in Illinois. In November 2021, Raoul entered into a settlement with online payday lending lead generators Money Mutual, LLC, Partner Weekly, LLC and Selling Source, LLC permanently barring them from arranging or offering small-dollar loans to Illinois consumers without a license. The companies had argued throughout the litigation that they were not required to be licensed because they were merely generating leads for other lenders.

Joining Attorney General Raoul in the comments are the attorneys general of California, Colorado, Connecticut, Delaware, Hawaii, Iowa, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Vermont and Washington, as well as the Hawaii Office of Consumer Protection.

Attorney General Raoul encourages individuals who have experienced problems with a buy-now-pay-later loan or service to file a complaint on his office’s website.

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