Home Consumer debt Apple buy now, pay later raises antitrust concerns, regulator says

Apple buy now, pay later raises antitrust concerns, regulator says

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The announcement of an Apple Pay Later feature has caught the attention of US consumer credit regulator, the Consumer Financial Protection Bureau (CFPB).

CFPB Director Rohit Chopra said Apple Pay Later raises “a host of issues,” including antitrust concerns…

Background

Apple’s Buy Now, Pay Later (BNPL) feature was announced at WWDC. Apple Pay Later will launch as part of iOS 16, allowing US Apple Pay users to make four equal payments over six weeks at no additional cost. Merchants can join the program without any impact on when or when they get paid.

Despite the lack of fees and interest, Apple will still make money from the service, and consumers have been warned to use the feature with caution.

Since the announcement, we’ve learned that Apple is foregoing a banking partner and will use your Apple ID history as one of its fraud prevention tools.

Apple Pay Later issues

The FinancialTimes reports that the CFPB’s concerns span antitrust, privacy and indebtedness.

The top US consumer credit regulator has warned that Big Tech’s entry into buy now, pay later lending firms risks undermining competition in the nascent sector and raises questions about the use of data client.

In a warning shot to Silicon Valley over Apple’s decision to launch its own BNPL service, Rohit Chopra, director of the Consumer Financial Protection Bureau, said his agency should “look very carefully [at] the implications of Big Tech entering this space”.

Among the questions the agency would consider was “whether it can actually reduce competition and innovation in the marketplace,” Chopra said in an interview.

In response to a question about Apple’s launch, Chopra said Big Tech’s move into short-term lending “raises a host of issues,” including how companies would use customer data. “Is it combined with browsing history, geolocation history, health data, other apps?”

The antitrust concern appears to be that Apple potentially has access to a lot of customer data in the form of Apple Pay usage, and could use that data to give itself an unfair advantage over competing BNPL services. The use of this data also raises privacy issues.

The regulator has already asked Apple to explain how the company collects and uses customer data in relation to Apple Pay generally. Similar questions were asked of Amazon, Facebook, Google and PayPal.

Finally, the CFPB fears that the BNPL schemes could increase consumer debt. These programs aren’t normally considered part of indebtedness due to the short-term nature of the funding, but Chopra thinks that should change.

“In order to get real visibility into the state of household balance sheets, we can’t just look at credit card debt or car loan debt,” Chopra said. “Now we have to consider buying now, paying debt later as well.”

The regulator has already asked the biggest names in BNPL to provide information that will help assess the need for any legislative oversight: Afterpay, Affirm, Klarna, PayPal and Zip.

This could be a first for Apple: going under antitrust control before the company has even started offering a service!

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