A coalition of seven state attorneys general has opened a coordinated inquiry into the nation’s largest buy-now-pay-later (BNPL) providers, seeking detailed information to determine whether their products are placing consumers at financial risk or violating state consumer protection laws. Letters were sent to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip.
The effort is led by North Carolina Attorney General Jeff Jackson and Connecticut Attorney General William Tong, joined by the attorneys general of California, Colorado, Illinois, Minnesota, and Wisconsin.
“Buy-Now-Pay-Later loans may seem simple and safe, but they can lead to surprise fees and growing debt,” Jackson said. “Laws exist to protect North Carolinians from predatory lenders, and we are going to make sure these lenders are following the law.”
The letters cite the rapid expansion of the BNPL market and express concerns that borrowers may be accumulating significant debt through multiple short-term installment loans, often taken out for everyday purchases including clothing, groceries, and event tickets. Recent studies referenced by the AGs show that BNPL usage is rising and that nearly one in four users has fallen behind on payments, triggering late fees and other penalties.
Several AGs highlighted the lack of federal guardrails following the Trump Administration’s decision to rescind a 2024 Consumer Financial Protection Bureau interpretive rule that would have required BNPL providers to follow the same Truth in Lending Act disclosure standards as credit card issuers.
As part of their inquiry, the AGs requested extensive information from BNPL companies, including:
- How they assess a consumer’s ability to repay
- Their billing practices and dispute-handling processes
- Internal analyses of delinquencies and defaults
- Customer service response data
- Copies of user agreements, consumer disclosures, and merchant contracts
- Differences between U.S. and international practices
- Any efforts to comply with Truth in Lending Act requirements
The letters underscore AG worries that BNPL lenders may not be providing adequate protections when consumers return purchases, never receive goods, or encounter billing errors. They also point to concerns that BNPL providers do not consistently evaluate borrower capacity, contributing to rising delinquency rates.
The coalition previously urged federal regulation of the BNPL industry in 2022, warning that fast approvals and flexible payment schedules make these products especially appealing to borrowers with limited credit experience or existing financial hardship.
BNPL companies have 30 days to respond to the inquiries, which could signal further multi-state action if regulators determine that consumer protection laws are not being followed.
