Offering “buy now, pay later” (BNPL) services that allow consumers to spread out payments for purchases over several weeks or months can be a plus for a small business because shoppers like the service, according to the Associated Press; however, since the payment plan is offered by third-party companies — such as Affirm and Klarna — there can be risks involved too.
If something goes wrong, consumers could blame the small business — even if they have nothing to do with the payment plan. A report from the Consumer Financial Protection Bureau (CFPB) in 2022 found that more than 13% of BNPL transactions involved a disputed charge or a return. In 2021, consumers disputed or returned $1.8 billion in transactions at five large BNPL firms, the CFPB said.
The plans also cost small businesses money — typically a 1% to 3% fee, which can add up when margins are tight.
A new CFPB rule dictates the BNPL companies must provide consumers with the same legal rights and protections as credit card lenders do.
That means consumers have legal protections including the rights to dispute charges, get a refund directly from the lender for a returned item, and get billing statements.
