A Democratic member of Congress is urging the federal government to examine the expanding “rent now, pay later” sector, expressing concern that Americans may not fully comprehend the associated fees and cost structures of these services as they gain popularity, according to a new release from The Associated Press.
Rep. Maxwell Frost, D-Florida, addressed a letter to Consumer Financial Protection Bureau (CFPB) Acting Director Russell Vought, requesting an investigation into rent now, pay later companies and accountability for any potential breaches of federal consumer financial protection regulations. In the letter, which was acquired by The Associated Press, Frost also inquired about the bureau’s efforts to safeguard renters and whether landlords are directing tenants towards rent-financing options.
Renters can divide their monthly rent into smaller installments over the course of a month using “rent now, pay later” (RNPL) businesses. A tenant with a $1,000 monthly rent bill might make two $500 payments or four $250 payments per week.
Frost claimed that in order to decorate his first apartment in Washington, he routinely used purchase now, pay later services, which resulted in significant debt. Frost stated in an interview that the only reason he was recently able to settle those obligations was because he had a substantial salary as a member of Congress. He stated that he thinks other young Americans probably have similar experiences.
“Americans should know they have rights when using these buy now, pay later products,” Frost said. “This is why the CFPB was created in the first place.”
Frost considered paying the rent using his credit card, but “thank God that didn’t happen,” he continued.
RNPL businesses are primarily concerned with enabling clients to spread out hefty rent payments across several installments. According to Frost, as the goods gain popularity, buyers should be given more information about them.
“While many of these companies market their loans as ‘innovative’ products that can help struggling cash-strapped renters, including by allegedly boosting their credit scores, many of these products more closely resemble repackaged payday loans,” Frost said in his letter.
According to a report published in February by Protect Borrowers and Toward Justice, certain RNPL companies ought to adhere to the criteria of the Truth in Lending Act because of the way their products are structured. At the time, the industry vehemently disagreed with the organizations’ conclusions.
“In addition to structural reforms to drive down the cost of housing, lawmakers, policymakers, and law enforcement at every level of government need to wake up to the reality that a broad array of companies are cashing in, at working people’s expense, on the massive burden of rent in Americans’ lives,” the groups said in the report.
The bureau has reduced rules and guidelines, discontinued enforcement operations, and taken steps to reverse earlier agency actions under Vought. Congressmen have also called for bureau inquiries, but these requests have mostly gone unmet. A request for comment on Frost’s letter was not immediately answered by the bureau.
Moreover, Vought’s time at the CFPB will conclude this summer. President Trump has selected Brian Johnson, an executive formerly with Capital One, to be the next permanent director of the bureau. During Trump’s first term in office, Johnson maintained a senior position at the bureau.
Frost stated that if the bureau does not take action on purchase now, pay later and rent now, pay later businesses, he intends to utilize the data from this letter and other sources to suggest legislation in the event the Democrats win control of Congress the following year.
“I’m not holding my breath […] but this is the first step of many we can take to make sure these products are used correctly and Americans are protected,” Frost said.
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