The exploding market of Buy Now Pay Later (BNPL) credit demands the same level of oversight that we give to credit cards. BNPL can help some borrowers spread out their payments, but entails real risks and costs, which is not clear in advertisements highlighting interest-free payments and “no impact” on credit scores. Regulation is necessary to protect consumers from hidden harms and costs to promote true financial inclusion.

Online and in-store retailers now commonly offer BNPL plans, which allow consumers to make purchases in installments, typically four payments over six weeks. Lenders typically require these payments to be tied to a credit card or debit card with direct deductions of the payments. Data show that borrowers are purchasing multiple items per month with each having its own payment date, unlike with a credit card. This can cause confusion and missed payments for consumers.

Spurred by pandemic-era increases in online buying, the market is exploding, with a third of U.S. adults, according to one survey, reporting having used BNPL already. Analysts project a 10-15 fold increase by 2025.