![]() He applauded the products for providing credit to people often left behind by traditional lenders, including low-income and young people. Toomey, R-Pa., said regulating the products too quickly or stringently would stifle innovation and hurt consumers. The providers make money from merchants, who pay a fee to offer the services to customers. Consumers accrue fees and can be cut off from using the service if they fall behind schedule. The service allows consumers to pay for a product, often bought online, in a set number of installment payments and a predetermined period of time, usually four payments over six to eight weeks. Spending through the products grew 230 percent from January 2020 to September 2021, according to a study commissioned by buy now, pay later provider Afterpay. The truth is I think there are reasons that we have regulated financial institutions and with that regulation while there are burdens, there are also some benefits.”īuy now, pay later products rose in popularity during the pandemic as lockdowns drove consumers online. “Some of these things bring real benefits, but I think we focus sometimes almost exclusively on the benefits and not on some of the challenges. A massive amount of new consumer products come up in this area,” Warner said. “We've seen now a migration in the nonregulated part of the financial industry. The lead-up to 2008 was characterized by the proliferation of asset-backed securities and collateralized debt obligations, but now it's the rise of consumer-focused fintech services, including buy now, pay later and advanced paycheck products, he said at a Senate Banking hearing Tuesday. Mark Warner, D-Va., warned that unregulated financial products have migrated from the commercial to the retail sector since the last crisis. Senate Banking Democrats see the specter of the 2008 financial crisis in emerging technology-based lending products that lack the consumer protections applied to traditional forms of credit, including buy now, pay later services.
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