In discussing his company’s relationship with the Consumer Financial Protection Bureau at an analyst conference this week, Affirm Chief Financial Officer Michael Linford struck an empathetic note, saying that drawing up regulations for a fast-growing industry like buy now-pay later isn’t easy.
In December, the CFPB ordered San Francisco-based Affirm and four of its biggest rivals in the BNPL sector to provide detailed information on their business practices after receiving complaints from six Democratic senators and consumer activists.
"I believe this is truly them saying, 'Help us understand what this market even is,'" Linford said Tuesday at the Bank of America Payments, Processors and IT Services conference. "And it was a genuine attempt to understand the market. That's how we took it and that's how we responded."
In starting its inquiry into the industry, the CFPB last December demanded information and said it’s concerned that consumers using the popular financing tool may accumulate too much debt as their purchasing data is mined for marketing. In a press release on the order demanding the information, the federal agency said it’s seeking information on the "risks and benefits of these fast-growing loans."
The industry and regulators have often been at odds over whether BNPL services, which vary widely from one provider to another, constitute a loan or not
CFPB Director Rohit Chopra has taken a tough approach since he started in the agency's top role last year, suggesting he'll increase oversight of BNPL and other emerging fintech services.
In a letter to Chopra in December 2021, 89 consumer and civil rights groups warned BNPL products "can lead consumers into taking on unmanageable amounts of debt and lack the same dispute or refund rights that credit cards have should a consumer be unsatisfied with their purchase.”
A group of Democratic senators raised similar concerns, which led the CFPB to begin the inquiry into the practices of the major BNPL firms. Only Affirm and Klarna publicly acknowledged handing in the paperwork by the March 1 deadline. The agency hasn't commented on the status of the inquiry.
Academics have chimed in, too. A study from British economists recently suggested that consumers may find themselves in a "debt spiral" as they take on debt and pay it off with credit cards.
