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NAFCU Network insight post highlights BNPL litigation
In a new insight post on NAFCU’s Compliance, Risk & BSA network, NAFCU Regulatory Affairs Counsel Aminah Moore engaged with credit unions regarding recent litigation involving Buy Now Pay Later (BNPL) products. Moore explains that although BNPL is being advertised as a free service without fees, consumers are in fact being charged fees by their financial institutions if there are not enough funds available to cover the installment charges.
Moore first explains the case of Vidaurre v. PayPal, Inc., where the plaintiff filed a class action complaint alleging that PayPal's BNPL program is deceptive to the consumer. The complaint further alleges that PayPal repeatedly reprocesses transactions when the account had insufficient funds, causing the Plaintiff $348 in bank fees.
"The complaint also alleges that PayPal’s BNPL program targets consumers living paycheck to paycheck because it increases purchasing power that they might not otherwise have available," writes Moore.
Moore details a similar case, Edmundson v. Klarna, Inc., before outlining litigation surrounding the ability to dispute a charge that was paid by a BNPL service when the merchandise is defective or returned to the merchant, as is the case in Shepard v. Affirm Holdings, Inc.
Moore breaks down why these cases are important for credit unions to make note of, and how regulators are currently addressing this topic. Most notably, the CFPB previously ordered five providers of BNPL products to provide information about their size, scope, and business practices and has also issued a request for comment to gain further information from the public. Read more about BNPL in NAFCU’s Regulatory Alert on this topic.
NAFCU-member credit unions that are part of the network can engage in a conversation on this topic through the post. Learn more about the NAFCU Networks.