Consumers turn to unregulated buy now, pay later plans

Shopping has changed in recent years as more and more of it has moved online. Now, for many consumers, especially younger ones, the way those purchases are paid for is changing too. One of those changes is the rapid growth of buy now, pay later plans that let shoppers buy in four easy payments with just one click, often with the promise of no interest charges or hidden fees.

This dramatic shift in how billions of dollars of purchase transactions occur has implications both for credit unions that may lose credit card or loan revenue and for their members who may find themselves surprised by interest and account fees, especially if they are unable to make one of their payments.

In Canada, the growth in buy now, pay later plans has been driven by such fintechs as Affirm Canada Holdings Ltd., Sezzle, Klarna Bank AB and Afterpay, which are largely unregulated and have no legal obligation to ensure their customers understand what they are getting into and if they can afford it. In many cases, it’s not clear—even to lawyers who have studied the fine print—whether these plans offer loans or simply a service, as some fintechs insist. That distinction affects whether they are covered by regulations or not.

 

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