Berkeley Law Students’ Pro Bono Project to Defend Vulnerable Communities from ‘Buy Now Pay Later’ Service


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BERKELEY – Students at UC Berkeley School of Law are conducting a public survey to research and better understand the potential risks of Buy Now, Pay Later (BNPL) services.

BNPL is a digital credit service offered through companies such as Afterpay, Klarna, or Paypal that allows consumers to purchase a product and pay for it over four installments. Most BNPL loans typically “range from $50 to $1,000 and are subject to late fees if a borrower misses a payment.”

General use of BNPL services greatly increased over the pandemic. A Department of Financial Protection and Innovation (DFPI) report states that “overall, with BNPL included, finance lenders originated almost 12 million consumer loans in 2020, a 530 percent increase over 2019.” Despite their growing prevalence, these services have mostly evaded federal and state regulations and oversight.

The student-led Consumer Protection Public Policy Order (C-3PO) at Berkeley Law was developed to address these kinds of consumer-related issues while providing law students with mentorship and opportunities to lead projects related to consumer protection and economic justice. In response to concerns surfacing from BNPL, students with C-3PO and the East Bay Community Law Center (EBCLC) will collaborate to retrieve data and client stories, which will assist in shaping policy solutions.

C-3PO is currently seeking individuals who have used BNPL services to share their experiences with these services through a survey. A link to the pro bono survey can be found here; additionally, the survey is also being offered in Spanish. The survey takes 10 minutes or less to complete, and C-3PO is hoping to receive responses from anyone who has financed a purchase using BNPL.

“Buy Now Pay Later or Pay in Four products have grown dramatically in recent years, and yet, they have largely evaded state and federal regulation and oversight. The goal… is to better understand consumer experience and understanding of Buy Now, Pay Later, and Pay in Four products,” says Rachel Gittleman, Financial Services Outreach Manager at the Consumer Federation of America, a nonprofit organization dedicated to advancing consumer interests. 

Along with the lack of government regulations and oversight, there have been certain risks associated with BNPL services. One of which is that these services may be undermining consumers’ rights or economic well being by failing to offer “minimal dispute resolution.”

Other possible concerns about BNPL include “data harvesting and monetization of consumers’ shopping data and preferences.” As loan lenders monitor a consumer’s sending practices, they may violate an individual’s digital privacy for the sake of more personalized ads. Furthermore, consumers may incur more fees than they are aware of because BNPL companies have the ability to charge multiple late charges on the same missed payment.

In early 2020, the California Department of Financial Protection and Innovation (DFPI) announced a $1.9 million settlement with Quadpay, Sezzle, and Afterpay after they were found to have “structured their products to evade regulation.” The settlement required the companies to become licensed lenders that “must consider consumers’ ability to repay loans, are subject to rate and fee caps, and must respond to consumer complaints.” This settlement made the need for more stringent consumer protection policies apparent.

C-3PO is a space that provides law students with mentorship and the opportunity to lead projects related to consumer protection and economic justice. Researchers at C-3PO, and attorneys at EBCLC, hope that the survey responses will help discern BNPL’s impact on low-income communities and communities of color, which are most vulnerable to predatory financial practices.

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