Buy Now, Pay Later (BNPL) services have become a popular payment method for consumers, allowing them to spread out payments for purchases over several weeks or months, often with zero or low interest rates. Small businesses benefit from offering these services as they attract more customers, but partnering with third-party providers like Affirm and Klarna comes with its own set of risks. If disputes or returns occur, consumers might unfairly blame the small businesses, despite their lack of direct involvement in the payment plans. A 2022 Consumer Financial Protection Bureau (CFPB) report found that over 13% of BNPL transactions involved disputes, with $1.8 billion in returns or disputes in 2021 alone at five large BNPL firms. Additionally, small businesses face a 1% to 3% fee for each transaction, impacting their already tight profit margins. However, a new CFPB rule issued in May mandates that BNPL companies must now offer consumers the same legal protections as credit card lenders, such as the ability to dispute charges and receive refunds directly from the lender. The rule also requires lenders to pause payment requirements during dispute investigations and issue billing statements similar to those from credit card companies. This regulation aims to bring more consistency and legal safeguards to the BNPL market, potentially alleviating some concerns for small business owners.
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