The consumer bureau began investigating buy now, pay later lenders in 2021 and raised concerns about the loans, including the risk that borrowers could overextend themselves by taking out multiple loans at once, in a 2022 report Problems shoppers experienced when trying to return purchases.
Here are some questions and answers about the buy now, pay later loan:
When does the regulation come into force?
The rule, published Friday in the Federal Register, the official journal of federal rules and regulations, takes effect in 60 days. The office said it will accept public comments on the rule through Aug. 1 and use them to help decide whether clarifications or further rules are needed. You can post comments online.
Can Buy Now Pay Later Loans Help Improve My Credit Score?
Despite years of debate, most lenders still don’t report Pay-in-Four loans to Equifax, Experian and TransUnion, the major credit reporting agencies that collect payment data used by lenders to decide whether a borrower is creditworthy. Some lenders and consumer advocates said they feared that if these loans were reported, the debt pattern, in which borrowers opened and paid off multiple short-term loans, could affect consumer credit, according to formulas used by lenders to assess risk.
But things could change. In February, Apple Pay Later announced that it would begin reporting pay-in-four credits to Experian; Max Levchin, Affirm’s chief executive, said he expects the company will also eventually report to Experian. Experian said it plans to include deferred loans on credit reports requested by consumers and eventually make them available to lenders, but the company has not yet included them in credit scores – the three-digit numbers that summarize a consumer’s credit report. TransUnion said it is willing to accept pay later data and eventually make it available to lenders, but does not include the loans on credit reports or include them in valuations. Equifax said it had been able to accept pay-in-four loan information for more than two years and had encouraged lenders to report such payment data, but that none were currently doing so.
How can I reduce the risk of buy now, pay later financing?
Ms. Chien of Consumer Reports advised against taking out multiple loans at once. Borrowers with four or more concurrent loans are twice as likely to miss a payment, she said. She also recommended setting up automatic payments; While you might think that paying manually offers more control, it actually increases the chances of you missing a payment. To pay, use a debit card or bank account, not a credit card, she said. If you don’t pay off your credit card balance in full, you may end up paying double-digit interest on a supposedly interest-free loan.
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2024-05-31 15:09:57
www.nytimes.com
