Congressman Byron Donalds (R-FL) announced a two-part legislative initiative to invalidate the Consumer Financial Protection Bureau’s (CFPB) recent interpretive guidance on Buy-Now-Pay-Later Loans (BNPLs).
The initiative, which forms part of an August legislative push, includes a House Joint Resolution and a letter directed to CFPB Director Rohit Chopra.
With this announcement, Congressman Donalds has now introduced one hundred pieces of legislation during the 118th Congress, including a fifteen-part financial services legislative package.
Read: Florida Rep. Byron Donalds Unveils Broad Coalition Backing The FISHES Act
He released the following statement:
“Buy Now, Pay Later is an easily accessible, inexpensive, and flexible form of financing that increases the purchasing power of consumers and boosts sales for retailers. The CFPB’s routine of overregulating new and emerging industries for political purposes will only set us back as a country and will continue to drive entrepreneurs offshore to more favorable nations. This is why I introduced legislation to rescind the CFPB’s latest effort to regulate Buy Now, Pay Later digital user accounts as traditional credit cards and ensure financial technology products are not mischaracterized. Government must put the American people first and Congress must rein in out-of-control bureaucracy. I am proud to offer this commonsense initiative to comprehensively review and facilitate debate on this impactful new CFPB policy.”
Buy-Now-Pay-Later (BNPL) loans are a type of short-term financing that allows consumers to make purchases and pay for them over time, typically in a series of installments.
How BNPL Loans Work:
- Purchase: You select BNPL as your payment option at checkout, either online or in-store.
- Down Payment: You may be required to make a small down payment at the time of purchase, but often it’s as little as 25% of the total price.
- Installments: The remaining balance is split into equal installments, usually paid bi-weekly or monthly.
- Interest and Fees: Some BNPL plans charge interest or fees for late payments, while others are interest-free if you pay on time.
Pros:
- Convenience: Easy to use and often available at checkout.
- Quick Approval: Usually doesn’t require a hard credit check.
- Interest-Free Options: Some providers offer interest-free plans if paid on time.
Cons:
- Temptation to Overspend: Can encourage impulse purchases and overspending.
- Late Fees: Missed payments can result in significant fees.
- Credit Reporting: Some BNPL providers may report late payments to credit bureaus, affecting your credit score.
Who Uses BNPL Loans:
BNPL loans are popular among younger consumers and those with limited credit history. They’re often used for smaller purchases like clothing, electronics, and home goods.
Important Considerations:
- Understand the Terms: Always read the terms and conditions carefully before using BNPL.
- Budget Carefully: Make sure you can afford the installment payments.
- Pay on Time: Avoid late fees and potential damage to your credit score.
Overall, BNPL loans can be a convenient way to finance purchases, but it’s important to use them responsibly and understand the potential risks.
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