NEW YORK, United States — Krista Michels can't get enough of the
online services that allow
American shoppers to pay for everything from
Christmas presents to monthly bills without fees, known as "buy now, pay
later."
اضافة اعلان
"I'm kind of addicted now," said the young mother in Washington
state.
She first turned to these solutions offered at check-out stores or online to
rebuild her credit rating, which was too low to access a traditional credit
card.
Michels now uses them whenever possible, at the supermarket or to pay her
internet bills.
Startups like
Affirm,
AfterPay,
Klarna, and
Sezzle usually allow consumers
to pay for a purchase in four installments without fees or interest, like a
typical credit card but without the associated paperwork and the complexities
of fees and interest payments.
They've also proven useful for consumers who do not have access to
traditional credit, such as new immigrants to the US.
But consumer advocates say they carry the same risks as credit cards and
shoppers must be careful not to saddle themselves with excessive debt and stay
mindful of the services' differing terms.
"The concern is that people could get overextended if they're not
careful," said Chuck Bell, a program director at Consumer Reports.
Don't 'overextend
your finances'
The concept of paying in installments is nothing new in American commerce,
but the disruptions of the
COVID-19 pandemic were a boost to these new
services, as more shoppers bought online.
From chain stores to small online sites, retailers have organized
partnerships to offer such payment services to customers and help them afford
what they usually could not, while financial institutions from Mastercard to
Goldman Sachs are looking to offer their own.
According to a study by consulting firm McKinsey, these payment solutions
represented 6 percent of unsecured loans in the US in 2016, 9 percent in 2020,
and are expected to rise to 13 percent in 2023.
"It's practical, it saves consumers because of lower interest costs and
it's disruptive," said Kenneth Leon, CFRA's banking industry specialist.
Big business agrees: Australia's AfterPay was purchased by Square for $29
billion this summer and Affirm is valued at $37 billion on Wall Street.
Regulators have taken notice of their success, with the Consumer Financial
Protection Bureau over the summer warning consumers to be wise and not
"overextend your finances" when it comes to these products. At the
same time, officials said current regulations on the firms are sufficient.
Michels, the shopper from Washington state, admits that the risk is there.
She has never missed a payment on anything she's purchased, but she spends more
than she usually would.
"It's almost like a game. What can I do to get my limit
increased?" she told AFP.
Different terms
The plethora of offerings with different terms has consumer advocates
worried that shoppers may wind up behind on payments.
"The rules and practices of each of these companies might be
different," said Bell of Consumer Reports, noting that many of these
services' users are young and lower income.
Affirm doesn't charge late payment fees but does charge interest on certain
transactions. Afterpay charges penalties for late payments but never more than
25 percent of the original purchase, while Sezzle allows its customers to
reschedule one payment per order.
Some startups work with credit rating firms, but others do not.
All say they won't issue customers new loans unless they're current on their
payments, but nothing prevents consumers from going elsewhere for credit.
Another concern is that getting refunds is more complicated when returning
an item paid for with one of these services.
Lauren Saunders, an associate director at the National Consumer Law Center,
said these products are not fundamentally different from traditional credit.
"Even with shiny fintech garb, new credit products need basic consumer
protections for credit to ensure that it is affordable, responsible,
transparent, and fair," she said at a congressional hearing earlier this
month.
Read more Business
.jpg)
.jpg)
