Attorney General Jeff Jackson Launches Multi-State Inquiry Into Leading Buy-Now-Pay-Later Lenders

North Carolina Attorney General Jeff Jackson is leading a coordinated, seven-state inquiry into the nation’s largest buy-now-pay-later (BNPL) companies, pressing the fast-growing industry for answers on whether its lending practices are putting consumers at risk or violating state law.

Jackson and attorneys general from California, Connecticut, Colorado, Illinois, Minnesota, and Wisconsin sent letters on Dec. 1 to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip — the six biggest BNPL providers in the country — seeking detailed information about fees, billing practices, dispute procedures, and how the companies determine a borrower’s ability to repay.

“Buy-Now-Pay-Later loans may seem simple and safe, but they can lead to surprise fees and growing debt,” Jackson said in a statement. “Laws exist to protect North Carolinians from predatory lenders, and we are going to make sure these lenders are following the law.”

Federal reviews show why regulators are concerned. BNPL use has expanded rapidly, with roughly 20 percent of U.S. consumers reporting at least one BNPL purchase in 2023 — and about a quarter of those users saying they missed payments, often triggering significant late fees.

BNPL products, once marketed for occasional purchases, are now widely used for everyday expenses such as clothing, groceries, and entertainment. Regulators say that quick approvals and the ability to take out multiple loans at once can make it easy for borrowers to unknowingly stack debt. Missed or late payments may also be reported to credit bureaus, potentially harming credit scores.

North Carolina has pushed for stronger oversight before. In 2022, the state joined other attorneys general urging federal agencies to develop uniform BNPL rules, pointing to heightened risks for younger or financially vulnerable borrowers.

Today’s multi-state letters were signed by numerous officials, including Kunal Choksi, Director of Consumer Protection for the North Carolina Department of Justice, underscoring the wide concern among state regulators about BNPL practices.

With BNPL use expected to spike during the holiday season, the Attorney General’s Office offered guidance to help consumers avoid accumulating debt:

• Only use BNPL when necessary, and pay in full if you can.

• Compare alternatives like credit cards that offer established dispute protections.

• Read the loan terms carefully, including late fees, subscription charges, and recurring payment schedules.

• Monitor accounts for errors or unauthorized transactions.

• Track payment dates to avoid missed installments and penalties.

  
  

Consumers with issues or concerns can contact the N.C. Department of Justice Consumer Protection Division at ncdoj.gov/complaint or by calling 1-877-5-NO-SCAM.