The U.S. Consumer Financial Protection Bureau (CFPB) plans to start regulating “buy-now, pay-later” (BNPL) companies like Klarna and Affirm Holdings due to worries their fast-growing financing products are harming consumers, the agency said on Thursday.
The watchdog, which does not currently oversee BNPL companies or products, will issue guidance or a rule to align sector standards with those of credit card companies, it said. The agency also said it would implement appropriate supervisory examinations.
The development will be a blow for the sector which is already under pressure due to rising funding costs and lower American consumer spending during soaring inflation.
It also marks a major offensive for CFPB director Rohit Chopra, who has pledged to scrutinize tech-driven companies as they increasingly encroach on the traditional financial sector.
“In the U.S., we have generally had a separation between banking and commerce, but as big tech-style business practices are adopted in the payments and financial services arena, that separation can go out the door,” he told reporters.