Yes, let’s give shoppers a way to take out “0%” interest loans on almost anything with little regulation or oversight… What could possibly go wrong? Buy now, pay later (BNPL) services like AffirmAFRM

, AfterPaySQ

, and PayPalPYPL

don’t seem to see the harm, offering a tempting way for spenders to split up payments into smaller chunks.

Play by the rules: Until now, BNPL firms have left consumers with fewer protections than their credit card counterparts. But after a months-long investigation, the Consumer Financial Protection Bureau (CFPB) announced new regulations last week, which will now treat BNPL providers like credit card companies, ensuring they offer timely refunds, allow customers to dispute charges, and provide regular disclosures and statements.

• Expected to kick in later this year after the agency accepts public feedback, these regulations mark a significant step toward tighter federal oversight of the fast-growing BNPL industry.
• While Swedish BNPL giant Klarna, eying an IPO this year, claims the rule changes will “not require any major changes” to its operations, there’s an underside side to BNPL shopping.

Shopping in the Dark

Today, one in five households uses a BNPL plan, a testament to the industry’s rapid adoption by retailers. But despite the CFPB’s efforts to regulate BNPL firms more like credit card companies, there’s a significant issue that hasn’t been addressed in the new rules.

• Most BNPL providers still don’t report all payments to major credit bureaus, leaving creditors without a full picture of borrowers’ spending habits or lenders, making it harder to assess risk.
• According to Bloomberg, BNPL firms have “resisted calls for greater disclosure” into their loans, arguing that credit agencies aren’t equipped to handle their data.

The real risk: Delinquencies on loans are increasing across the economy, but because BNPL transactions aren’t fully visible, they’re creating a “shadow debt” problem on Wall Street. Analysts warn that this lack of transparency enables overspending, especially for folks who have maxed out other borrowing methods. With the BNPL market expected to double in size by 2028, there’s a risk that trouble in the $687B industry could creep up on the economy — despite the absence of upfront interest on these loans, as they often lead customers into a cycle of reborrowing with sky-high rates.