Consumer Reports is sounding the alarm on the security of several popular buy now, pay later apps.
In a new report, Consumer Reports rated apps across multiple criteria. The organization focused on privacy, transparency, and security.
Popular buy now, pay later apps Klarna and Afterpay both received mediocre ratings of 77 across the combined areas of safety, privacy, and transparency. The apps Perpay and Zilch were the lowest scoring apps in the entire study. Perpay scored a 69 and Zilch a 70.
Costs and Impact
One of the main worries that exist for regulators and experts is the buy now, pay later apps failure to adequately inform consumers of the costs and impact of the loans they take out. This includes apps not clearly disclosing fees to consumers. The report also found the apps put users data at risk.
“As with other new types of financial technology, there is little oversight of buy now, pay later services even as these products continuously evolve,” Delicia Hand, director of financial fairness at Consumer Reports, said in the report.
There are also worries that the ease of using buy now, pay later apps can lead to consumers to overspend.
Fraud Concerns
As financial fraud cases continue to take center stage, the lack of security and fraud protection on the buy now, pay later apps leaves many regulators with concerns. They worry the apps are an easy tool to use for fraud and identity theft.
In its study, Consumer Reports uncovered that only Afterpay, Klarna, and PayPal monitor fraud in real-time and alert users of suspected fraud.
“All BNPL companies can do better to protect vulnerable consumers from fraudulent activity,” Hand said. “And they should inform consumers of any cybersecurity breach where their information is at risk, and not hold consumers liable for fraudulent charges.”
A crowdsourced roundup from BuzzFeed back in February featured numerous buy now, pay later users who shared their own concerns and regrets of using the services. The issues raised in the roundup aligned with many of the concerns highlighted in the Consumer Reports study.
Expert Recommendations
Experts recommend that you take proactive steps to protect your buy now, pay later accounts. They suggest checking your account for fraudulent purchases and closing any unused accounts. Experts also recommend checking your credit report for any possible identify theft.
It is also recommended that you opt-out of data sharing when you first register for buy now, pay later apps. Doing so will give you some control over how much of your information the app is able to access.