The best thing about filing for bankruptcy protection is that it discharges your eligible debts, but the worst thing about it is that you have to start rebuilding your creditworthiness from zero. Secured credit cards are a good place to start, but they have such low credit limits that, if you are living paycheck to paycheck like most gainfully employed Americans are, you can easily max them out within one billing cycle. How do you pay for the last grocery haul of the month? When you do not have a credit score high enough to open a credit card or account or get a loan from a bank, buying now and paying later (BNPL) is your only feasible option. There are some nice things about BNPL, to be sure, most notably that the purchases are usually interest-free, and if you use it for small purchases like grocery shopping, the installment amounts are low. BNPL has its risks, though. Like most financial products, the government does not start regulating them until they become popular. The Consumer Financial Protection Bureau (CFPB) has issued new regulatory guidelines for BNPL services, but they have not addressed the biggest problem with BNPL. If you are considering filing for bankruptcy and need help planning for a new normal where BNPL is the only type of credit available to you, contact an Oakland Chapter 7 bankruptcy lawyer.
CFPB Orders BNPL to Provide the Same Protections That Credit Cards Provide
The CFPB guidelines require companies that offer BNPL services to provide customers the same protections regarding returns and fraudulent charges that credit cards provide. For example, BNPL services must refund customers’ money when they return a purchased item or cancel a subscription. They also require them to allow customers to dispute fraudulent charges or charges for which they never received the item they ordered. Most BNPL companies already provide these protections, but now, they are a legal requirement instead of just a good business practice.
The Worst Thing About BNPL is the Effect That it Has or Does Not Have on Your Credit Score
The guidelines do not address the biggest factor that causes BNPL customers to stay poor instead of increasing their credit scores. The good news is that BNPL does not require a credit check, or at least it is good news in the short term. The universally bad news is that BNPL does not report your payment history to the credit reporting bureaus. That way, when you apply for a loan, and the lender runs a credit check, they do not see your BNPL debt, so when you get the loan, you may struggle to make payments on it while also making payments on your BNPL purchases. Even worse, when you do make your BNPL payments on time, you do not get a credit score boost, leaving you in an endless loop of BNPL without increasing your creditworthiness.
Contact the Law Office of Melanie Tavare About Staying Out of Trouble With BNPL
A debt relief lawyer can help you make realistic plans if BNPL is the only kind of credit you can access. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a case evaluation.
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