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CFPB to regulate buy now, pay later companies like Affirm, Klarna

Yahoo Finance Live anchors discuss the U.S. Consumer Financial Protection Bureau’s plans to regulate buy now, pay later companies like Affirm and Klarna.

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: Yeah, another mover we're watching or movers we're watching are "buy now, pay later" companies, like Affirm. Shares are moving down, ooh, 6.66% this morning after the US Consumer Financial Protection Bureau announced plans to begin regulating businesses, like Affirm, Block-- well, or Afterpay, which is owned by Block, PayPal, Klarna, due to worries that the "buy now, pay later" products are harming consumers. A total of $24 billion was loaned out in 2021 through these types of companies. And so we are seeing them decline.

By the way, Affirm did comment to us in a statement regarding all of this, talking about what it's going to mean for the company. And Affirm says, it's operated on principles of transparency. It's put people first. You can see there that it "represents a big step forward for consumers." And so they're trying to say that this is actually not automatically, right, Sozz? A bad thing for these companies.

BRIAN SOZZI: Yeah, and no this did not-- regulation, full disclosure-- not come up. We talked with Max Levchin, the founder and CEO of Affirm at the Goldman conference. That interview is now on our homepage. We talk more about what they're building and a look towards next year. And to that end, it was interesting, he said he has not still, has not sold a single share of Affirm yet. So I thought that was an interesting takeaway. But again, the market is looking at this news here this morning, thinking, regulation? Maybe profits get hit. So that's how they're reading through it.

BRAD SMITH: You know, as we think about how many consumers are leaning into "buy now, pay later" options and paying over time, I think even as we were looking at some of the data that was coming out from Mastercard earlier this week and the projections of how much more consumers are expected to spend over the course of this holiday season, some of the regulation that comes forward for "buy now, pay later," it's not all bad.

Because at the end of the day, if you have more consumers leaning into credit right now, you don't want to have a credit crisis trigger where so many people are taking on debt that they're not equipped to pay off over an extended period of time. And that's not knowing where unemployment is also going to rise in the future as well.

And so you kind of combine those two things together, looking out for and looking to protect the end consumer. I think that's a critical part of this. But then at the end of the day, it also still does affect some of the ability for growth for these companies, too, in the interim period.

BRIAN SOZZI: My Lamborghini is on Affirm. You know, I pay it off next month.

BRAD SMITH: [LAUGHS] Yeah.

BRIAN SOZZI: I'm excited. No, I'm totally kidding. I don't have a Lamborghini. Only kidding. No Lamborghini. No, no, no. No Lamborghini.

JULIE HYMAN: I was talking to a friend recently who tried to buy some furniture using Affirm, just to test out the service. And she wasn't approved, even though--

BRAD SMITH: Interesting.

JULIE HYMAN: --shall we say, you would think that her credit wouldn't be an issue. But who knows.

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