For people locked out of homeownership, “Buy Now, Pay Later” has become a way to finance basic expenses — with future income that may not actually materialize. The Trump administration, meanwhile, is busy protecting the lenders.
Last month, Billboard reported that around 60 percent of general admission attendees of the music festival Coachella financed their tickets through a “Buy Now, Pay Later” (BNPL) payment plan. These programs function as short-term loans, allowing consumers to pay for purchases in a series of installments — often with low or no interest. Now, while this figure was troubling, it was not inherently alarming: in theory, BNPL offers flexible access to short-term credit, and as long as each installment is paid on time, no additional costs are incurred.
But that caveat is proving more than hypothetical, as more and more US consumers fail to repay their loans. In its Q1 earnings release, Klarna, one of the largest BNPL providers, reported a net loss of $99 million — up more than 100 percent from the previous year. Klarna also posted a 17 percent year-over-year increase in customer credit losses, meaning that it made more money off of late fees than last year, both in total and as a share of total lending. Much of that growth increase stems from the BNPL industry’s aggressive expansion in the United States, exemplified by Klarna’s partnership with DoorDash in March and the announcement just days ago that Costco would partner with Affirm on purchases above $500.
In other words, US consumers are increasingly taking out loans to attend concerts, order takeout, and buy groceries — and are increasingly failing to pay back those loans on time. Survey data shows that Gen Z and millennial consumers are more likely to use BNPL plans to finance travel costs, especially those involving live events. Within those demographics, according to a Federal Reserve report from December 2024, people with lower credit scores and overall financial well-being indicators are more likely to use BNPL programs. While people on firm financial footing may find that BNPL offers them a convenient way to spread out their payments toward a major purchase, such as plane tickets, the industry’s incursion into everyday spending is cause for concern.
It is not hard to understand why these companies need to be regulated more, not less: their business model depends on people going into debt, missing payments, and then paying the BNPL provider late fees or interest on their loans. By dressing up their services with buzzwords and sleek user interfaces — and exploiting regulatory loopholes that exempt them from standard disclosure requirements — these companies prey upon people’s FOMO, persuading them to buy Coachella tickets with money they don’t actually have. In fact, the 2024 Federal Reserve study referred to prior research showing that people spend more when BNPL is offered at checkout — precisely why vendors partner with BNPL companies in the first place. It’s a clear example of how these companies exploit cognitive biases to profit from consumers’ debts.
BNPL companies are not alone in embracing this business model. The entire credit industry has made record profits in recent years by jacking up interest rates and consumer penalties. A few years ago, a startup called Yendo unveiled a new credit card backed by people’s car titles, targeting subprime customers who are unable to secure conventional loans. Its rapidly increasing user base is a bleak reflection of financial precarity and corporate greed.
The troubling trends related to BNPL programs are merely one small symptom of a broader economic sickness, exacerbated by the extreme instability of the first few months of the second Trump administration. The Federal Reserve Bank of New York reported that total household debt increased in Q1 2025 to $18.2 trillion, while aggregate delinquency rates increased as well, with 4.3 percent of outstanding debt in some stage of default. A considerable portion of this phenomenon owes to the resumption of student loans’ inclusion on credit reports, amid an overall crackdown on student debt holders, undoubtedly worsening the debt strain on American families. Of course, Trump’s tariff policy carries with it the promise of a price burden that disproportionately falls upon the millions of Americans who live paycheck to paycheck, and the threat of a recession looms large.
In a country like the United States, in which the risk of being saddled with inordinate medical debt at any given moment is ever present, the dangers of yet another credit product — even one marketed as flexible and interest-free — should not be underestimated. Because BNPL loans are not reported to credit agencies, it is difficult to quantify the true scale of this “phantom debt.” On one hand, this opacity means that missed BNPL payments won’t immediately damage a consumer’s credit score; on the other, it makes it difficult to paint a complete picture of the overall health of household finances. Recently, in response to the heightened risk brought about by the proliferation of BNPL programs, the UK government announced new regulations to rein in what it called the BNPL “wild west of unregulated borrowing.” The rules set standards to protect consumers from debt traps, bringing BNPL in line with other credit products.
The United States, however, has taken the polar opposite approach. Rather than bolstering oversight, the federal government has systematically kneecapped the Consumer Financial Protection Bureau (CFPB), leaving American consumers more vulnerable to predatory corporate practices. One year ago, the CFPB issued an interpretive rule that would treat BNPL loans like credit-card debt, bringing them under the purview of the Truth in Lending Act’s Regulation Z. The Trump administration, however, has drawn from a well-used playbook of refusing to enforce existing regulatory guidance, stating that it will deprioritize enforcement and intends to revoke it altogether. The message to the fintech industry is unmistakable: the government is on its side, not that of American consumers.
The Trump administration has made it clear where its loyalties lie — helping the ultrawealthy grow richer at the expense of the working class. The expansion of BNPL debt is just one more frontier in the capitalist quest to commodify as much of the human experience as possible, with predatory corporations continuing to push the envelope under a government that is unwilling to curb their unethical practices. It is not normal to go into debt to order a pizza or attend a concert, yet these companies seek to normalize exactly that. The fact that so many people take the bait, especially those in younger generations, is indicative of the broader economic anxiety and hopelessness that characterizes our broken economy.