BOSTON, Mass. (WWLP) – Attorneys General from 21 states, including Massachusetts, are asking the Consumer Financial Protection Bureau (CFPB) to take a closer look at loan practices that may be in violation of state and federal consumer laws.

Read the letter from the Attorneys General to the CFPB.

The coalition of attorneys general are concerned about “buy-now-pay-later” (BNPL) lending practices that may cause consumers to be stuck in rotating debt. These are installment loans that offer consumers the option to purchase products or services on-line with little or no money down and then pay off the loan in short payments. While most BNPL loans don’t charge interest, they do charge a fee for late payments which can cause a significant increase the amount of the loan. They report late or missed payments to credit bureaus, impacting credit ratings. The lenders also do not consider a consumer’s ability to pay during the application process.

And, unlike a credit card purchase, these loans don’t offer dispute protections if the purchased item is lost, stolen or faulty, or you are a victim of a scam.

“Buy-now-pay-later lenders can make promises that sound too good to be true, and often, they are, resulting in borrowers paying much more money in deals they can’t get out of,” AG Healey said. “I am joining my colleagues in calling on the CFPB to examine the practices utilized by this industry and ensure that consumers are not being preyed upon so that lenders can make an unfair profit.”

According to Healey’s Consumer Advocacy Report, consumers reported they were unaware that they were taking out a loan and were asked to pay more money than initially agreed to. The report offers guidance for consumers to consider before taking out a new loan including certain questions to ask:

  • What is the interest of the loan?
  • What is the length of the loan?
  • What charges happen if you make a late or partial payment?
  • What do you lose if you cannot pay the loan back?

The coalition of states are California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Vermont and Washington, as well as the Hawaii Office of Consumer Protection.