Buy now, pay later loans can get tricky when you want a refund

Some shoppers say “buy now, pay later” may not be all it’s meant to be.

After experiencing explosive growth during the pandemic – BNPL spending in the US has soared 230% since the start of 2020 – the hype around installment purchases is fading as the costs of items from all days increase and consumers return to discretionary purchases.

Although 45 million shoppers embraced installment purchases last year alone, some have a case of buyer’s remorse, especially if they shelled out more than they can afford or had to trouble keeping up with multiple loans.

According to a survey by LendingTree, nearly 70% of Buy Now, Pay Later users admit to spending more than they would if they had to pay for everything up front. As a result, 23% of consumers said they regretted financing a purchase this way, LendingTree found.

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About 10% of users reported difficulty in the past year making payments on BNPL loans they took out, according to a separate report from the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute.

But making a return can be a whole other issue.

“People have gotten used to refunds and returns being pretty simple when something is bought with a credit card, but with buy now, pay later loans because they’re so new, the process isn’t not quite a science,” said Matt Schulz, chief credit analyst for LendingTree.

Buying is the easy part; come back, not so much

“Part of their growth has been the ease and clarity of these loans, but that certainly doesn’t seem to be the case when it comes to repayments, and that’s a problem,” Schulz said.

BNPL’s return policies vary and in most cases you will need to contact the merchant, as well as the loan provider, to get your money back. Retailers may also have their own rules for BNPL returns and whether goods purchased online can be returned in store.

At Affirm, for example, buyers must first request a refund from the seller and continue to make payments until the return is approved, then the funds are refunded within three to 10 business days, depending on the ‘company.

“We do our best to support all Affirm consumers throughout their buying journey and to resolve return and refund issues as they arise,” a spokesperson said. of Affirm.

However, if you have paid interest charges during this period, this money is not refundable.

BNPL has less regulation, less consumer protections

Currently, BNPL loans are not subject to the same regulations that apply to credit or debit cards and there are fewer consumer protections, including the ability to dispute a charge if you have purchased a good or service not delivered as promised.

“People have gotten used to refunds and returns being pretty simple when something is bought with a credit card, but with buy now, pay later loans because they’re so new, the process isn’t not quite a science,” Schulz said. said.

Without much regulatory oversight, the BNPL market currently exists in “a gray legal space,” according to Marshall Lux, a fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.

The Consumer Financial Protection Bureau said it is reviewing the impact of these programs on consumer debt accumulation and applicable consumer protection laws.

The CFPB has yet to announce its next steps.

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