SAN FRANCISCO—Affirm wants the United States to find ways to cap late fees on buy now, pay later (BNPL) loans.
In an interview with the Financial Times, Affirm co-founder/CEO Max Levchin said limits on fees for late 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 Financial Times. “Everyone in the industry who uses late fees is basically just covering up for the fact that they’re not very good at underwriting.”
CFPB’s Plans Are Nixed
As the CU Daily reported earlier, the Consumer Financial Protection Bureau (CFPB) ruled in 2024 that BNPL should be regulated as credit and announced a planned $8 cap on credit card fees. But those proposals were canceled this year by the Trump administration.
How Some Companies Generate Revenue
The Financial Times explained in its report BNPL companies make money via fees charged to retailers who offer their zero-interest loans to consumers at checkout. However, providers such as Klarna and Afterpay also generate revenue from late repayment fees, though Affirm does not impose these penalties.
