Office of the
Illinois Attorney General
Kwame Raoul

BNPL Products May Expose Consumers to Unclear Terms, Hidden Fees and Debt Traps 

Chicago – Attorney General Kwame Raoul today joined a multistate coalition of seven attorneys general sending letters to the six largest buy-now-pay-later (BNPL) providers seeking detailed information regarding their pricing and repayment structures, consumer contracts, user agreements and disclosures. The inquiry aims to determine if BNPL companies are complying with consumer protection laws and whether their products may be placing Illinois consumers at financial risk.  

The letters were sent to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip [LINK Letters] by the attorneys general of California, Connecticut, Colorado, Illinois, Minnesota, North Carolina and Wisconsin.  

“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.”

These loans are a form of point-of-sale financing that allow consumers to divide the cost of purchases into multiple installments, but there can be downsides. The BNPL industry has scaled quickly as consumers use the loans for a wide range of goods and services, from clothing and groceries to event tickets. As the busy holiday shopping season kicks off, consumers are increasingly relying on BNPL loans, potentially racking up serious debt and fees.  

Raoul’s action follows a decision by the Trump administration to abandon a federal rule issued in 2024 by the Consumer Financial Protection Bureau under the Biden administration. The rule clarified that BNPL providers are covered under the federal Truth in Lending Act, meaning BNPL providers must, among other things, give consumers the same clear disclosures and protections as traditional credit products. As a part of this inquiry, Attorney General Raoul is asking BNPL providers to explain how they assess a consumer’s financial capacity to repay these loans, and to provide information related to billing practices, late fees and the handling of disputed charges.   

Attorney General Raoul led a coalition of attorneys general in 2022 urging federal regulation of the BNPL industry, raising concerns that by touting quick credit application approvals and convenient, flexible payment schedules, BNPL loans and services are particularly appealing to borrowers already struggling with debt or younger borrowers who lack experience with credit. The attorneys general also pointed out that, similar to predatory lending products, BNPL loans may contain terms and features that are known to trap people in cycles of debt.

Raoul also urged consumers to consider the following tips:

• Avoid using BNPL, particularly multiple BNPL products at once, if you can pay for the entire purchase in full. 
• Consider alternative options such as credit cards or other loans, which have better procedures for resolving disputes. 
• Make sure you understand the terms of the loan, including any late fees, subscription fees, or other fees.
• Monitor the activity on your account for any billing errors or unauthorized charges. 
• Carefully track your BNPL loan payment due dates so that charges to your debit or credit card don’t come as a surprise.   

Consumers who encounter problems with BNPL lenders can file a complaint by visiting the Attorney General’s website or by calling the Attorney General’s Consumer Fraud Hotlines:

1-800-386-5438 (Chicago)
1-800-243-0618 (Springfield)
1-800-243-0607 (Carbondale)
1-866-310-8398 (Spanish-language hotline)