BNPL Under the Microscope as Attorneys General Launch Investigation

The six largest buy now, pay later providers are facing scrutiny from a multistate coalition of attorneys general who have concerns over the risks BNPL products present. The lawmakers seek to gain a better understanding of how the companies that offer BNPL programs operate. 

The attorneys general sent letters to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip requesting the companies provide them with information on their BNPL products.

The information they seek includes pricing and repayment structures, procedures for addressing disputes from customers, and how BNPL outfits determine a customer’s ability to repay them for the loans they provide.

The inquiry is in its initial stages, but it could ultimately lead to an increase in rules for BNPL companies, which have largely flown under regulators’ radars of late.

Traditional lenders also stand to face impacts from the investigation, especially if it opens the door to further investigations regarding other types of credit products.

The BNPL companies attorneys general are requesting information from include industry leaders Klarna and PayPal.

The Wall Street Journal reports that President Donald Trump’s administration has deserted a rule that former President Joe Biden’s office issued stipulating that BNPL companies comply with the same consumer protection guidelines that other lenders follow.

The letters from the attorneys general express concern over recent Federal Reserve findings that the number of BNPL borrowers falling behind on their payments has increased to 1 in 4.

“Our inquiry seeks to better understand the impact of these and other related issues with BNPL on our states’ residents, and whether BNPL providers may be in violation of applicable consumer protection laws,” the attorneys general wrote in the letters.

The attorneys general from California, Colorado, Connecticut, Illinois, Minnesota, North Carolina, and Wisconsin are among those involved in the inquiry.

Growing More Popular With Consumers

Buy now, pay later companies may have the runaway success of their products to blame for the increased attention they’re receiving from lawmakers.

After all, if only a small number of people were turning to BNPL programs to make purchases, attorneys general likely wouldn’t spend much time or resources examining offerings from leading BNPL companies.

A recent report estimates that shoppers spent more than $760 million through BNPL products on Black Friday alone in 2025. Overall, experts forecast BNPL spending to top $20 billion from November through December this year, which represents an increase of 11% compared with BNPL use during the same period last year.

“This holiday shopping season, in the face of rising prices and other economic challenges, consumers may be tempted to turn to these loans to afford gifts, without meaningful underwriting, or fully understanding that they can turn into serious debt and mounting fees,” California Attorney General Rob Bonta said in a press release.

Traditional lenders may applaud increases in oversight for BNPL programs. But lenders that operate in the high-risk loan arena may also face more calls to enhance transparency around their practices if regulators slap BNPL companies with more rules to protect consumers.

For now, leaders in the BNPL space have defended their programs. According to The Wall Street Journal, Klarna said via a statement that it protects consumers with safeguards the company placed in its services, and Affirm pointed to its lack of late fees and bogus charges.