The buy-now-pay-later (BNPL) sector came under huge pressure this morning, after the US Consumer Financial Protection Bureau (CFPB) announced an inquiry into the industry.

The regulator specifically named five US players that include Afterpay, Zip Co, Affirm, Klarna, and PayPal.

US-listed Affirm stock price sank 11% on the news, along with the stocks of ASX-listed BNPL today.

At the time of writing, both Afterpay (ASX:APT) and Zip Co (ASX:Z1P) were down 8%, while smaller players like Sezzle (ASX:SZL) and Laybuy (ASX:LBY) plummeted by 6%.

 

Code Company Last %Today %Wk %Mth %Yr MktCap
APT Afterpay Limited 82.22 -8.1% -18.0% -30.0% -28.3% $25,978,999,694
HUM Humm Group Limited 0.72 0.7% -3.4% -12.2% -38.2% $354,116,847
IOU Ioupay Limited 0.155 -6.1% -6.1% -27.9% 10.7% $90,982,991
LBY Laybuy Group Holding 0.23 -6.1% 48.4% -47.1% -83.5% $62,343,239
OPY Openpay Group 0.83 -7.8% -15.3% -30.3% -69.8% $95,336,147
SPT Splitit 0.225 2.3% -6.3% -30.8% -82.1% $103,262,380
SZL Sezzle Inc. 3.06 -5.3% -9.5% -29.2% -49.0% $640,376,702
Z1P Zip Co Ltd. 4.09 -8.1% -19.3% -29.6% -26.6% $2,620,315,234
ZBT Zebit Inc. 0.29 0.0% -19.4% -25.6% -71.8% $27,436,524

 

Growing too fast

The CFPB said on its website that it was particularly concerned about the impact BNPL providers have on the accumulation of consumer debt.

As part of the inquiry, the regulator wants to conduct an investigation into how current consumer protection laws apply to BNPL operators, as well as how those companies harvest and use customer data.

“Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too,” said CFPB director Rohit Chopra.

“We have ordered Affirm, Afterpay, Klarna, PayPal, and Zip to submit information so that we can report to the public about industry practices and risks.”

The CFPB also warned about the quickness of the application process, along with the companies’ willingness to serve consumers with ‘scant or subprime credit histories’.

The CFPB said the rapid rise in the use of BNPL has particularly spiked during the COVID-19 pandemic, and throughout the holiday shopping season.

As part of the inquiry, the bureau says it will be working with its international partners in Australia, Sweden and Germany as well the UK.

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