Buy Now, Pay Later (BNPL) or pay-in-four products allow consumers to purchase goods in four equal, often interest-free installments over a set time period (often 6 weeks). BNPL is often available directly at checkout on an e-commerce website (like Amazon or Apple) or through a third-party smartphone or web application. Examples of third-party BNPL providers include Affirm, AfterPay, Klarna, Splitit, Sezzle, Paypal, Perpay, and Quadpay/Zip. While many BNPL providers also make installment loans that carry interest, this research paper addresses only products that meet the Consumer Financial Protection Bureau’s (CFPB) definition of BNPL: “a four-installment, no-interest consumer loan, typically with a down payment of 25 percent and the remaining three installments due in two-week intervals.”

The market for BNPL products has grown dramatically in recent years despite an incomplete regulatory landscape. Although no-interest BNPL is not currently regulated at the federal level, California has taken the lead at the state level by requiring the major BNPL providers to obtain state lending licenses and abide by state lending laws, fining four providers in 2020 and an additional provider in 2022 for making unregulated loans to consumers. Despite California’s move to require BNPL providers to comply with its existing lending laws, it remains unclear how much consumers know about their rights when using BNPL, as well as how they view and use these products.

Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) created a consumer survey to better understand who uses BNPL, why they use it, and how much they understand about the credit product. The survey explored consumer knowledge and usage in California. CFA and CRL solicited community organizations in California in search of BNPL users to serve as respondents, from among the organizations’ clients, members, or contacts. As such, this sample was not constructed to be representative of all California consumers, and may not be representative of all California BNPL users. Nevertheless, the patterns of use and experiences expressed by the respondents add useful information to the growing body of research into the product.