Buy Now, Pay Later: Policy Issues and Options for Congress

“Buy Now, Pay Later” (BNPL) is a form of point-of-sale financing a consumer can use to purchase an item and pay for it later on a set payment schedule. Such products fit into a broader suite of products that allow consumers to keep spending steady even when their cash flows are limited. Unlike classic layaway programs that allowed consumers to pay first and receive the items later, BNPL allows consumers to receive goods or services immediately and pay for them over time. The most popular form of BNPL product is called “Pay in 4,” where a consumer generally pays 25% of the total cost up front for a purchase and makes the remaining three payments in equal two-week increments. This product does not charge interest but may feature late fees or other fees. While this is the most common form of BNPL, most firms also offer monthly installment products for larger purchases that can have longer terms and charge interest or sometimes other fees. Unlike general purpose credit cards, which can be used at a wide variety of retailers once issued, traditional BNPL products can generally be used only with merchants that directly partner with BNPL originators. Such transactions are underwritten at the time of payment solely for a specific purchase. The market for BNPL products is dominated by financial technology (fintech) payment companies as opposed to banks. These fintechs include Affirm, Klarna, Block (the parent company of Afterpay), PayPal, Sezzle, and Zip. Firms often offer a wider suite of products in addition to more traditional BNPL, including subscriptions or virtual cards that allow customers to use BNPL services at merchants not in the BNPL firms’ merchant partner networks. BNPL firms rely on fintech-bank partnerships and bank offerings for certain products, including balance accounts and debit cards with pay later options. BNPL firms also partner with banks to originate many of their loans. Increasingly, these BNPL fintechs have either applied for industrial loan company (ILC) banking charters or indicated their desire to do so. While nonbank firms have traditionally offered BNPL products, banks and credit card companies have begun to offer similar interest-free products to smooth larger purchases with, but often with fees. Such products are offered after purchases have been made, as opposed to the point of sale, which is different from traditional BNPL. BNPL usage by consumers has accelerated over time. Recent research by the Consumer Financial Protection Bureau (CFPB) found that Pay in 4 originations increased from $2.2 billion in 2019 to $43.9 billion in 2023. CRS estimates further growth to $63.3 billion in 2025, similar to an estimate by the Federal Reserve Bank of Richmond ($70 billion). CRS estimates that the BNPL monthly installment loan gross merchandise volume (GMV) is roughly $40 billion in 2025. The primary source of BNPL-related revenue for many firms comes directly from merchants. Merchants pay a fee to BNPL companies for each related transaction. Certain BNPL firms with card businesses also earn revenue from debit card interchange. Other sources of revenue include consumer interest income from monthly installment products, late fees, advertising revenue, and subscription services. Revenue sources and underlying business models vary significantly, and for certain firms it is more difficult to assess how their BNPL businesses make money and their exact product mix. There are a number of potential policy issues related to BNPL. Whether BNPL providers should be subject to the Truth in Lending Act (TILA, 15 U.S.C. §1601) is one of the key issues policymakers have debated. A previous interpretative rule (89 Federal Register 47068) issued by the CFPB in May 2024 that was later withdrawn in May 2025 (90 Federal Register 20084) applied subpart B of TILA to Pay in 4 and treated BNPL in some ways like credit cards. Other policy debates relate to how BNPL relates to broader consumer debt, incorporation of BNPL in credit scores, and data visibility. These include the degree to which BNPL products may encourage increased spending by consumers. Credit furnishing by BNPL firms remains inconsistent, with firms often furnishing monthly installment products to credit bureaus. As of the date of this report, only one major firm universally furnishes Pay in 4 data, even as certain credit scoring models are increasingly capable of using and scoring such data. While BNPL today remains a minority of total consumer volume for payments, a lack of central data collected on the BNPL may present risks to policymakers attempting to assess overall risks of the product if it continues to grow. In the 118th and 119th Congresses, Members of Congress have introduced a number of bills pertinent to BNPL. These include bills that would address TILA’s applicability to Pay in 4 (H.J.Res. 190, H.J.Res. 195, H.R. 8628, H.R. 6891/S. 3561), require a study of BNPL and credit reporting (H.R. 5083), limit Pay in 4 payments for semiautomatic rifles (H.R. 4289), and require study of the financial effects of BNPL on military members (H.R. 5683).