Hartford, Conn. — Connecticut Attorney General William Tong has launched an investigation into the nation’s largest buy now, pay later (BNPL) lenders, warning that the fast-growing industry may be exposing consumers to unclear terms, hidden fees, and mounting debt.
Tong, joined by a coalition of attorneys general from six other states, sent letters to Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip, demanding detailed information about their pricing structures, user agreements, billing practices, and how they assess a borrower’s ability to repay.
The inquiry comes after the Trump Administration rescinded a federal rule issued by the Consumer Financial Protection Bureau in 2024 that would have required BNPL lenders to comply with the same disclosure and consumer protection standards as traditional credit providers under the Truth in Lending Act.
“Buy now, pay later may appear to be a convenient way to afford a purchase, especially now during the holiday season, but shoppers need to watch out for debt traps,” Tong said. “As Trump rescinds critical protections for buy-now-pay-later consumers, it’s up to states now to ensure shoppers know what they are getting into, and to ensure these companies are held accountable.”
Rapid Growth, Rising Risks
BNPL loans—short-term, point-of-sale financing that divides purchases into multiple installments—have surged in popularity as consumers increasingly use them to buy clothing, groceries, electronics, and even event tickets. The ease of approval and flexible repayment structures often appeal to younger borrowers or individuals already struggling with debt.
But Tong and other attorneys general warn that BNPL products may contain features resembling predatory lending practices, including:
- Late fees that escalate quickly
- Reporting missed payments to credit bureaus
- Encouraging borrowers to take on multiple simultaneous loans
- Ambiguous or hard-to-find contract terms
The attorneys general have previously raised concerns that borrowers can easily fall into cycles of debt, especially during high-spending periods like the holiday shopping season.
State-Level Action After Federal Pullback
In 2024, the CFPB clarified that BNPL lenders must provide the same disclosures as credit card companies. But the rule was overturned in May 2025, eliminating those protections.
With federal oversight rolled back, Tong said the responsibility now falls to states to scrutinize the industry.
The letters to BNPL lenders request detailed explanations of:
- How companies determine a borrower’s capacity to repay
- Billing and repayment processes
- Handling of disputed charges
- Any fees, interest, or subscription costs
California, Colorado, Illinois, Minnesota, North Carolina, and Wisconsin have joined Connecticut in the inquiry.
Tong’s office offered several tips for consumers considering BNPL financing:
- Avoid BNPL if you can pay for the purchase upfront.
- Consider credit cards or traditional loans with clearer protections.
- Review all fees and terms carefully.
- Track payment due dates to avoid unexpected charges.
- Monitor accounts for billing errors or unauthorized activity.
Consumers experiencing issues with BNPL lenders are encouraged to file complaints at ct.gov/agcomplaints.
