Why more buyers are trying to pay ‘buy now, pay later’ credits

More Clarna clients have problems to repay their loans “Buy now, pay later,” said short -term lender this week. The disclosure corresponded to the reports of the Bank and Bank and SyndingTree platforms, which mentioned a growing portion of all users of “Buy Now, pay later” saying they had fallen back into pay.

Delayed or lost installments are a sign of financial health of fraud between a segment of the US population, some analysts say, as the country’s total debt grows in a record of $ 18.2 trillion and the Trump administration moves to collect in federal student loans.

Buyers who choose to buy financially through BNPL services tend to be younger than the average consumer, and a study by the federal reserve last year said that black and Hispanic women were particularly likely to use plans, which customers of all income are growing.

“While BNPL provides loans to financially vulnerable customers, these customers can be evenly excessive,” the authors of the Federal Reserve wrote. “This concern is in accordance with previous research that has shown that consumers spend more when BNPL is offered when controlling, and that BNPP use leads to an increase in overdue tariffs and payments and interest rates on credit cards.”

As Klarna grows its user base and income, the Swedish company said its first quarter losses increased 17% compared to January-March last year, to $ 136 million.

A spokesman for the company said in a state that the growth mainly reflected the largest number of credits Clarna made year by year. The percentage of its loans at a global level that went unpaid in the first quarter rose from 0.51% to 2024 to 0.54% this year, and the company sees “no sign of a weakened American consumer,” he said.

More customers are using plans ‘buy now, pay later’

Buy now, pay later plans in general, allow customers to divide payments for purchases into four or fewer installments, often with a low cash register. Loans are usually marketed as zero interest, and most do not require credit check or a soft credit check.

BNPL providers promote plans as a safer alternative to traditional credit cards when interest rates are high. The popularity of delayed payments and ways of expansion that clients can use have also sparked public attention.

When Klarna announced a partnership with doordash in March, news led to internet comments about Americans who received credit to buy food for receipt. Similar skepticism emerged when Billboard revealed that more than half of Coachella’s attendees used installment plans to finance their tickets at the music festival.

An April report from LendingTree said about four in ten purchasing users now, the payment of subsequent plans said they had made subsequent payments in the past year, from one to three in the past year. According to a Maji report by banking, about one in four credit users chose them because they were easy to obtain than traditional credit cards.

The six largest BNPL providers – Affirm, offspring, clarna, paypal, seasons and ZIP – originated about $ 277.3 million for $ 33.8 billion in commodity in 2022, or a sum of about 1% of credit card costs that year, according to the Consumer Financial Protection Bureau.

An industry that is coming under a less regulatory control

The Federal Agency said that this month it did not intend to implement a Biden era regulation that was created to establish more boundaries on Fintech lender.

Treated Purchase Rule, Free Credit, such as traditional credit cards under the act of lending to the truth, requiring disclosure, refund processing, an official dispute process and other protection.

The regulation, which came into force last year, also prohibited the borrower from being forced to pay automatic or to be charged with numerous fees for the same lost payment.

The Trump administration said its non -banning decision came “in the interest of foot resources to support diligent American taxpayers” and that it would “keep its sources of implementation and supervision concentrated on pressure on consumers, especially service”.

Consumer lawyers claim that without federal supervision, clients seeking refunds or in search of clear information about BNPL tariff structures and interest rates will have less legal recognition.

There are risks to get installment loans

Industry observers point to customers who receive credit that they cannot afford to pay as a high risk of using BNPL. Without credit offices keep track of new loan form, there are fewer safeguards and fewer oversight.

Justine Farrell, Chairman of the Knauss University of San Diego Marketing Department at Knauss Business School, said that when consumers are unable to make loan payments in time, she awakens the economic stress they are already experiencing.

“Customer financial positions feel the most widespread they have in the long run,” said Farrell, who studies consumer behavior and BNPL services. “The cost of food is still rising, at the top of the rent and other goods … so consumers are taking advantage of the ability to pay later items.”

The US Consumer Federation and other supervision organizations have expressed concern about the return of BNPL regulation as the use of loans continues to increase.

“Taking a head -to -head approach to the new Fintech Credit Universe, the new CFPB is once again favorable teaching at the expense of everyday people,” said Adam Rust, director of financial services in the American Consumer Federation.