The Consumer Financial Protection Bureau (CFPB) published a report it said offers insights on the Buy Now, Pay Later industry.

The report, Buy Now, Pay Later: Market trends and consumer impacts, found that industry has grown rapidly since the pandemic, but borrowers may receive uneven disclosures and protections. The CFPB said the five firms surveyed in the report originated 180 million loans totaling over $24 billion in 2021, a near tenfold increase from 2019.

“Buy Now, Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards,” CFPB Director Rohit Chopra said in a release. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan.”

Buy Now, Pay Later is a form of interest-free credit that allows a consumer to fully purchase a product, and then pay back the loan over four installments, with the first installment typically being a down payment on the purchase. Most Buy Now, Pay Later loans range from $50 to $1,000, and are subject to late fees if a borrower misses a payment.

According to the report, Buy Now, Pay Later has branched out to industries as disparate as travel, pet care and even groceries and gas. Apparel and beauty merchants, who had combined to account for 80.1 percent of originations in 2019, accounted for 58.6 percent of originations in 2021.

Other report finding include:

• Loan approval rates are rising; 73 percent of applicants were approved for credit in 2021, up from 69 percent in 2020.
• Late fees are becoming more common. In 2021, 10.5 percent of unique users were charged at least one late fee, up from 7.8 percent in 2020.
• More purchases are ending in returns. In 2021,13.7 percent of individual loans in 2021 had at least some portion of the order that was returned, up from 12.2 percent in 2020.
• Lenders’ profit margins are shrinking. Margins in 2021 were 1.01 percent of the total amount of loan originated, down from 1.27 percent in 2020.

The report also identified several areas of risk of consumer harm, including:

• Inconsistent consumer protections. Borrowers seeking Buy Now, Pay Later credit may encounter products that do not offer protections that are standard elsewhere in the consumer financial marketplace. These include a lack of standardized cost-of-credit disclosures, minimal dispute resolution rights, a forced opt-in to autopay and companies that assess multiple late fees on the same missed payment.
• Data harvesting and monetization. Many Buy Now, Pay Later lenders are shifting their business models toward proprietary app usage, which allows them to build a valuable digital profile of each user’s shopping preferences and behavior. The practice of harvesting and monetizing consumer data across the payments and lending ecosystems may threaten consumers’ privacy, security, and autonomy.
• Debt accumulation and overextension. Buy Now, Pay Later is engineered to encourage consumers to purchase more and borrow more. As a result, borrowers can easily end up taking out several loans within a short time frame at multiple lenders.

Some states consider Buy Now, Pay Later to be consumer credit and require state licensing or registration, as well as compliance with state consumer credit laws. Some states do not require licensing or registration for Buy Now, Pay Later products with no interest or finance charges.

The CFPB said it will identify potential interpretive guidance or rules to issue with the goal of ensuring that Buy Now, Pay Later lenders adhere to many of the baseline protections Congress has already established for credit cards.

As part of its review, the bureau said it also will ensure buy now, pay lat Buy Now, Pay Later er lenders, just like credit card companies, are subjected to appropriate supervisory examinations.