BNPL providers in the US are once again under the regulatory spotlight, as provider have received a letter asking for details around consumer protection.
Six buy-now pay-later (BNPL) providers, including Klarna and PayPal, have received a letter from a coalition of seven US attorneys general raising questions about their prices, consumer protections and other operational practices.
The coalition is led by Connecticut Attorney General William Tong, who sent letters to Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip.
According to a December 1 release from Tong’s office, the letters ask the companies to provide detailed information on pricing and repayment structures, consumer contracts, user agreements and disclosures.
“Buy now, pay later may appear to be a convenient way to afford a purchase, especially now during the holiday season, but shoppers need to watch out for debt traps,” said Tong.
“We’re asking the six largest buy-now-pay-later lenders for detailed information on their costs and fees, their disclosures, how they vet their customers’ abilities to pay, among other questions.”
Tong previously joined a coalition of attorneys general in 2022 to question federal regulation of the BNPL industry, raising concerns about consumer protections.
Attorneys general compared BNPL to predatory lending products and said the loans may contain terms and features which trap people in cycles of debt. While some BNPL products do not charge interest, they said, most providers apply late fees and report late or missed payments to credit bureaus.
Why send the letters now?
Two factors appear to have driven the timing of the new inquiry. The first is the holiday shopping season and the second is the President Donald Trump administration’s reversal of rulings placed on BNPL in 2024.
Under President Joe Biden, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule which clarified BNPL providers are regulated in the same way as traditional credit products.
The rule was widely criticised by providers, with some describing it as a “one size fits all approach” while Klarna called it “baffling,” adding the ruling was like comparing “oranges to apples.”
When Trump returned to office in 2025, the CFPB reversed a number of decisions made at the end of 2024, including the BNPL rule.
“As Trump rescinds critical protections for buy-now-pay-later consumers, it’s up to states now to ensure shoppers know what they are getting into, and to ensure these companies are held accountable,” said Tong.
At the time of the reversal, a CFPB statement read: “The CFPB will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.
“The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses. The Bureau is further contemplating taking appropriate action to rescind Buy Now, Pay Later.”
BNPL providers welcomed the decision to scrap the federal rule and said they remain open to regulation, although they argue any framework should be tailored and carefully developed rather than broad and sweeping.
