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Affirm CEO Sees ‘Roadmap’ in CFPB’s Buy Now, Pay Later Report (1)

Sept. 15, 2022, 4:16 PMUpdated: Sept. 15, 2022, 5:29 PM

The Consumer Financial Protection Bureau’s efforts to boost oversight of buy-now-pay-later financing will benefit the industry, Affirm CEO Max Levchin said.

The CFPB said in a Thursday report that it’s looking for ways to bring consumer protection measures for credit card users to buy-now-pay-later (BNPL) products, which are typically installment loans for purchases to be paid back in four equal payments.

“I think there may be some soul searching among the competitors” in how they undertake technical efforts and hire compliance workers, said Levchin, who also founded Affirm, one of the largest BNPL financing providers.

The 83-page report “creates expectations and set a roadmap for the industry” that could lead to safer BNPL products, Levchin said. The report also highlighted the potential benefits offered by BNPL products, which typically don’t charge interest.

The CFPB also said it’s concerned that some BNPL firms sell consumer data to third parties. Levchin noted that Affirm doesn’t sell consumer data, and uses it only for underwriting purposes.

“A fair amount of what the report has called for we have chosen to do,” Levchin said in an interview with Bloomberg Law. “We have always seen this as a lending activity subject to all the lending rules and regulations.”

The CFPB is currently exploring ways to bring the biggest BNPL providers under direct examination by the bureau’s examination teams as a way to make sure that the companies are complying with existing consumer protection laws. The CFPB examines banks with more than $10 billion in assets, as well as other large payday lenders, debt collecters and mortgage servicing firms.

Levchin said it was too soon to say whether Affirm supports the idea of direct CFPB examination.

He also said it was too soon to say whether Affirm would volunteer to be supervised if other BNPL providers don’t. But Affirm would be ready if the CFPB moves to require examinations of the industry, he said.

“We definitely have players in the industry who, generally speaking, are quite happy not to be looked at. We’re not one of those,” Levchin said.

The CFPB said that only one BNPL company doesn’t charge late or other hidden fees and takes extra care with consumers’ data. Of the five large BNPL firms studied by the CFPB in its report, Affirm is the only one that doesn’t charge late fees.

The CFPB’s highly-anticipated report highlighted both the spectacular growth of the buy now, pay later industry since 2020, as well as some of the consumer protection issues that have arisen within it.

CFPB Director Rohit Chopra said in a statement that the bureau’s goal is to make BNPL consumer protections look more like those for credit card users – including enhanced dispute resolution and return protections; Truth-in-Lending Act disclosures; and late fee limits.

The bureau is also looking to change the way firms handle consumer data, including curbing the sales of user data without consumer permission.

BNPL companies stocks, including Affirm, have fallen in recent months as the Federal Reserve hikes interest rates and recession fears lurk.

(Updated with further comments from Levchin and the CFPB throughout)

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com