In recent years, “buy now, pay later” services have gained popularity among consumers seeking to spread out payments for their purchases. These payment plans are often marketed as having zero or low interest rates, making them an appealing option for many shoppers. However, small businesses that offer these services may face some risks.
One potential problem that small businesses may encounter is that if something goes wrong with a payment plan, consumers may blame the small business even if they were not directly involved in the process. A report from the Consumer Financial Protection Bureau found that more than 13% of “buy now, pay later” transactions involved a disputed charge or a return in 2022, totaling $1.8 billion in transactions at five large BNPL firms.
Another issue small businesses may face is the costs associated with these payment plans. Typically, these costs come in the form of a fee of 1% to 3%, which can impact profit margins. However, the CFPB has implemented a new rule aimed at providing small business owners with peace of mind. The agency requires “buy now, pay later” companies to offer consumers the same legal rights and protections as credit card lenders, ensuring that consumers have the ability to dispute charges and obtain refunds for returned items while also receiving billing statements for transparency and accountability.
