Attorney General Kwame Raoul has joined six other state attorneys general in launching an inquiry into the practices of major buy-now-pay-later (BNPL) lenders. The coalition sent letters to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip requesting detailed information about their pricing structures, consumer agreements, and disclosure policies.
The states involved in this inquiry are California, Connecticut, Colorado, Illinois, Minnesota, North Carolina, and Wisconsin. The investigation aims to determine whether these companies comply with consumer protection laws and if their products could put Illinois consumers at financial risk.
“Consumers may not realize that buy-now-pay-later loans don’t have the same protections as other loan products,” Raoul said. “Individuals who are facing financial hardship or who are new to using loans are especially vulnerable to getting trapped in a cycle of debt, particularly if taking out many buy-now-pay-later loans. I join my fellow attorneys general in asking that these lenders provide information, so we can determine whether they are complying with consumer protection laws.”
BNPL loans allow customers to split payments for purchases into installments but have raised concerns over unclear terms and hidden fees. Their use has grown rapidly across various types of purchases such as clothing and groceries. With the holiday shopping season underway, officials warn that increased reliance on BNPL options may lead some consumers to accumulate significant debt.
This action comes after a federal rule issued by the Consumer Financial Protection Bureau during the Biden administration clarified that BNPL providers must follow the Truth in Lending Act’s disclosure requirements. However, this rule was later abandoned under the Trump administration. As part of this multistate inquiry, Attorney General Raoul is seeking information from BNPL companies regarding how they assess borrowers’ ability to repay loans as well as details about billing practices and dispute resolution procedures.
In 2022 Raoul led another effort calling for federal oversight of BNPL lenders due to concerns that easy approvals and flexible payment schedules make these services attractive to individuals already struggling with debt or lacking experience managing credit.
Raoul advised consumers considering BNPL services to avoid using multiple products simultaneously if possible; explore alternatives like credit cards which often offer better dispute resolution; understand all loan terms including fees; monitor account activity closely; and track payment due dates carefully.
Consumers experiencing issues with BNPL providers can file complaints through the Attorney General’s website or by contacting one of several Consumer Fraud Hotlines: 1-800-386-5438 (Chicago), 1-800-243-0618 (Springfield), 1-800-243-0607 (Carbondale), or 1-866-310-8398 for Spanish-language assistance.