DENVER — Brandon Yau said he used Affirm for concert tickets, splitting the cost into more manageable payments.
"I think it was to the Glass Animals show, actually, at Red Rocks," said Yau. "They were $260, so it definitely lessens the blow once you see your debit card and you're like, 'Oh, it's only $60 this time. Nice.'"
Like Yau, many consumers are using the buy now and pay later option when buying big-ticket items online, often using platforms such as Affirm, Klarna or Afterpay. However, a lack of regulations surrounding these short-term loans could put those buying into buy now, pay later (BNPL) loans to borrow money for goods and services at risk.
A recent Lending Tree report showed that half of the people surveyed expect to apply for a BNPL loan in the next six months. Consumers are using the loans to purchase clothes, technology, and home decor, but the survey shows a growing number of people (25%) are using BNPL loans to pay for groceries. Food delivery services, such as Doordash, are also now offering pay-later options.
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"I was worried, especially after I saw that people are using it on DoorDash and all the food services," said Amy Brunson, a Colorado resident who has never used the services. "I always thought it was a gateway to credit card debt, and people could get in trouble with it."
A Bankrate survey released earlier this month found that about half of BNPL users have had issues, including missing a payment or overspending. Josh Hawkins used Klarna to finance a fishing pole, and while he is happy with the fish he caught, he said he regrets taking out the loan.
"It ended up being more expensive at the end because they add interest to it," said Hawkins. "That's how they get you. That's how they get their money. Looking back on it, I probably wouldn't do that again."
Chris deGruy Kennedy, president and CEO of the Bell Policy Center, said BNPL loans are similar to credit cards but without consumer protections.
"The regulations are not there," said Kennedy. "Right now, we're not really in an apples-to-apples environment. I would say that if we were getting good data collection and had the right kinds of guardrails on these products, it could potentially be a useful competitor with credit cards in this market."
The Associated Press reports that shoppers who opt to finance purchases through BNPL services tend to be younger than the average consumer, and a study from the Federal Reserve last year said Black and Hispanic women were especially likely to use the plans, which customers of all income levels are increasingly adopting.
“While BNPL provides credit to financially vulnerable consumers, these same consumers may be overextending themselves,” the authors of the Federal Reserve study wrote. “This concern is consistent with previous research that has shown consumers spend more when BNPL is offered when checking out and that BNPL use leads to an increase in overdraft fees and credit card interest payments and fees.”
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Last year, the Consumer Financial Protection Bureau took action, saying BNPL loans fall under the same federal regulations as credit cards. But last month, under the Trump administration, the bureau noted it would not be prioritizing enforcement.
"Colorado, in particular, now has more of a need to look at these and make sure that they're not doing wrong by people in our state," said State Senator Mike Weissman, D-Aurora.
Weissman said he and other lawmakers are looking into possible financial justice legislation next session. Until then, he is warning consumers about BNPL issues, including refunds and sky-high interest rates.
"At the point when you're well into the double digits, it's really concerning, frankly," said Weissman. "If folks are going to use these, they really do need to look at what is the actual cost of credit going to be."
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