Personal finance expert reacts to Buy Now Pay Later investigation

(WJAR) — Consumers are projected to spend a record-breaking $20 billion using Buy Now Pay Later (BNPL) this holiday season.

That’s an 11% increase from just last year, which is drawing scrutiny from lawmakers.

Attorneys general from seven states, including Connecticut, announced last week they were opening an investigation into the six largest BNPL lenders in the US.

Together, they’re working to determine if these companies – like Affirm, Afterpay and Klarna – are putting users at financial risk or violating consumer protection laws.

NBC 10 recently spoke with personal finance expert Mark Scribner, senior vice president of Wealth Enhancement, about some of his concerns.

“A lot of people that are doing it – they don’t understand the ramifications unfortunately, because it’s not front and center,” said Scribner. “If you’re late, it can ding your credit.”

He continued, “And now you’re seeing all these attorneys general across the country paying attention, because it’s a consumer protection issue for sure.”

For a while, BNPL wasn’t as dangerous because missed payments weren’t being reported to the credit bureaus, but that all changed earlier this year.

With a record-breaking number of Americans now using BNPL, Scribner told NBC 10 that he’s very concerned about what’s going to happen come January.

“It’s hard to keep track,” he explained. “Like you don’t really know when you’re sometimes falling behind.”

Scribner said communication about upcoming BNPL payments can be lacking.

“A lot of people are unintentionally falling behind because the communication going forward after they sign up for that – that’s where the issues are coming from,” he explained.

So what’s worse this holiday season – making a purchase on your credit card, knowing you’re only going to be making the minimum payment? Or using BNPL, knowing you’re probably going to miss the payment?

“I think it’s more harmful to use the BNPL, because of the communication,” said Scribner. “At least with a credit card, you know you can go online and you can see – they’re going to send you SMS messages that you’re late or various ways that they’re going to communicate with you.”

He continued, “They’re also going to tell you the cost of not paying it off promptly, which was a consumer protection issue that was added a long time ago.”

Scribner said it’s also important to keep in mind that making a return on a Buy Now Pay Later purchase can be much more complicated. Often times, you’ll have to continue making installment payments – even after you’ve returned the product.

He said your credit card may also give you additional consumer protections if your purchase is stolen or not shipped to the right place.