Affirm Calls for New Caps on BNPL Late Fees

In an interview with the Financial Times (FT) published Tuesday (Oct. 21), Affirm co-founder/CEO Max Levchin said limits on fees for late buy now, pay later (BNPL) payments would let leaders focus on their underwriting models rather than banking on missed payments.

“If buy now, pay later … was capping its ability to make money on delinquencies and defaults by regulating fees down, it would motivate the players to just get really, really good at underwriting,” Levchin told the FT.

“Everyone in the industry who uses late fees is basically just covering up for the fact that they’re not very good at underwriting,” he added.

The U.S. Consumer Financial Protection Bureau (CFPB) ruled last year that BNPL should be regulated as credit and announced a planned $8 cap on credit card fees. But those proposals were jettisoned this year following President Donald Trump’s election, as his administration imposed sweeping cuts at the CFPB.

As the FT notes, BNPL companies make money via fees charged to retailers who offer their zero-interest loans to consumers at checkout. However, providers like Klarna and Afterpay also generate revenue from late repayment fees, though Affirm does not impose these penalties. Levchin told the UK news outlet that similar regulations could still be enforced through other means, like using legislation.

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“You don’t have to have the CFPB to interpret a law, you also don’t have to have the CFPB to enforce it. And so there’s many ways of accomplishing it.”

In other BNPL news, PYMNTS CEO Karen Webster wrote last week about recent media reports about the dangers of pay later plans, focusing on users who accumulated tens of thousands of dollars worth of debt from these credit programs.

“These stories make compelling reading and encourage viral posts and social piling on,” Webster wrote. “They also fundamentally misrepresent how virtually everyone actually uses these products.”

However, PYMNTS Intelligence data offers a data-driven narrative often lost amid sensationalized stories, showing that between 97% and 98% of BNPL users manage their obligations responsibly. Delinquency rates are remarkably low per Federal Reserve data and public disclosures from BNPL providers.

“That makes BNPL far from the credit train wreck it’s made out to be,” Webster added. “It’s a predictable, transparent and disciplined credit option that most people use carefully and sparingly. And people like using it, so they do.”