Assemblyman Chigozie Onyema (D-Newark) wants New Jersey to crack down on the increasingly popular “buy now, pay later” loans, which allow consumers to pay for purchases in installments but can leave them facing hefty fees if they fall behind.
Under legislation introduced by Onyema, lenders would need to be licensed by the state and would face limits on fees and interest rates. The bill, A5664, would also require lenders to disclose loan terms more clearly, follow responsible lending standards, and establish procedures for resolving consumer disputes.
“Buy Now, Pay Later loans offer short-term flexibility and convenience, but for too many, they create long-term financial risks,” Onyema said. “As the cost of everyday necessities continues to rise, people turn to these loans to afford groceries, rent, gas, and utilities, only to find themselves trapped in a cycle of debt and junk fees.”
Onyema recently sponsored the Fair Price Protection Act, which banned grocery stores from using surveillance pricing to charge customers different prices based on their personal information.
Buy now, pay later loans have become a popular alternative to credit cards, allowing shoppers to spread payments over several weeks or months, often without interest. But borrowers who miss payments can wind up paying additional fees.
Nearly half of Americans have used buy now, pay later financing, according to Protect Borrowers, a consumer advocacy organization. The group says nearly half of those borrowers have missed a payment in the past year, with women and people of color more likely to use the loans.
“This is the other edge of the affordability crisis,” Onyema said. “On one hand, we can’t afford what we need. On the other, we’re drowning in debt just to keep our heads above water.”
Among the companies offering the loans are Klarna, Affirm, Afterpay, PayPal, Sezzle, and Zip.
Onyema said New Jersey should not wait for the federal government to impose tougher restrictions on the industry.
“At a time when Washington is putting Wall Street and Silicon Valley ahead of our families, states must step in to regulate an industry whose business model practically depends on missed payments and mounting fees,” Onyema said. “No one should have to mortgage their future just to afford the basics. If we’re serious about bringing down costs, we must also hold the companies that profit from financial desperation accountable.”