[Congressional Record Volume 171, Number 214 (Thursday, December 18, 2025)]
[Senate]
[Page S8923]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Mr. Van Hollen, Mr. Blumenthal, and 
        Mrs. Gillibrand):
  S. 3561. A bill to amend the Truth in Lending Act and the Consumer 
Financial Protection Act of 2010 to apply certain protections and 
oversight to buy now, pay later loans, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. REED. Mr. President, today I am joined by Senators Van Hollen, 
Blumenthal, and Gillibrand, in introducing the Buy Now, Pay Later 
Protection Act. This bill will extend key consumer protections for 
traditional credit cards to ``buy now, pay later,'' BNPL, loans. These 
include standardized disclosures, periodic account statements, 
chargeback rights, billing error rights, and a prohibition on surprise 
fees.
  The typical ``pay-in-four'' BNPL loan allows consumers to purchase a 
product and then pay back the loan over four equal installments, with 
the first installment akin to a downpayment. BNPL typically does not 
charge interest, but it does charge late fees. The lenders make their 
money primarily by charging merchants. When BNPL is offered as an 
option at check-out, consumers are more likely to complete a purchase 
and tend to spend more money.
  In the mid-2010s, BNPL became a popular alternative to credit cards 
for online retail purchases, particularly among younger consumers. Its 
popularity soared during the pandemic, as more consumers turned to 
online shopping. Growth since then has been explosive. According to 
data from the CFPB and Adobe Analytics, BNPL credit totaled an 
estimated $2 billion in 2019 and is expected to be around $120 billion 
this year. Around 15 percent of Americans have used BNPL in the past 
year--that's is around 90 million people.
  When used responsibly, BNPL can be an important source of credit for 
those who are weary of credit cards. If they are well-designed, 
transparent, accountable, and supervised, BNPL products can 
legitimately help these Americans meet their need for credit. In fact, 
the typical BNPL user is a lower income borrower who wants to spread 
out payments over time without incurring interest.
  Given the huge growth in this market in only a few short years, it is 
critical to review when the laws governing these products must be 
updated. It should be uncontroversial for BNPL borrowers to receive 
many of the basic protections that credit card holders currently have, 
but they currently lack any of these protections because existing laws 
were not drafted with BNPL products in mind. This has resulted in gaps 
and uncertainty for BNPL users.
  The commonsense protections in the BNPL Protection Act include clear 
information on due dates, fees, and how to dispute charges. The bill 
requires BNPL lenders to issue periodic account statements. It provides 
consumers with a right to seek a chargeback when they are victims of 
fraud or deception, so that they don't keep getting charged if they 
don't get what they paid for. They also prohibit the credit reporting 
bureaus and debt collectors from going after a consumer when they 
dispute a transaction, so that borrowers are not penalized or harassed 
into repaying debt they may not owe. The CFPB had these protections in 
place until the current Acting Director rescinded them earlier this 
year.
  These protections are crucial now because BNPL delinquencies and 
defaults have been on the rise. Nearly 25 percent of BNPL users made 
late payments, which is a sharp increase over prior years, in many 
cases resulting in significant late fees even on relatively small-
dollar loans. BNPL users do seem to be struggling to an even greater 
degree than credit card holders. According to Bloomberg, 43 percent of 
those who owe money to BNPL services said they were behind on payments, 
and 28 percent said they were delinquent on other debt because of BNPL 
spending. Indeed, the Federal Reserve Bank of New York found that ``a 
disproportionate share of BNPL users are already financially fragile'' 
and that while BNPL may deliver benefits to lower income consumers, 
``BNPL may attract consumers who already have financial difficulties 
and are struggling to pay their existing bills and debt payments.''
  In short, this bill will preserve the availability of BNPL credit 
while helping consumers avoid hidden fees, better manage their 
finances, and have more transparency into the terms and conditions of 
their loans. It will clarify the regulatory status of BNPL loans to 
match how consumers are using this new product.
  Finally, this bill will require the CFPB to begin supervising BNPL 
providers in order to spot violations before they snowball. BNPL 
providers are not currently subject to compulsory Federal supervision 
by the CFPB. Rather, they may be subject to supervision only by the 
States in which they do business. Some States require registration and 
conduct examinations, while others do not. This system may allow 
potential violations of consumer protection laws to fall through the 
cracks, leaving consumers exposed to harm and limiting accountability 
for BNPL providers who don't play by the rules.
  I thank the supporters of this legislation, including the National 
Consumer Law Center, on behalf of its low-income clients, Americans for 
Financial Reform, and the Consumer Federation of America.
  I urge my colleagues to join in supporting this important 
legislation.
                                 ______