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Apple rolls out Apple Pay Later — a buy now, pay later service

A MARTÍNEZ, HOST:

Some iPhone users will soon be able to use their phones to pay for purchases in installments. It's called Apple Pay Later, and it lets users apply to split purchases up to a thousand bucks in four payments with no interest or fees, but is it risk free? Lauren Saunders is associate director at the National Consumer Law Center. Lauren, Apple says its Pay Later service was designed with financial health in mind. Are there any downsides?

LAUREN SAUNDERS: Well, buy now, pay later products, you know, can be better than a credit card if they help you avoid paying a lot of interest or amassing debt that you pay for months or years. But they can be tricky because they can make things look cheaper than they are, and people can add up debt in surprising ways.

MARTÍNEZ: Look cheaper than they are - that is a dangerous phrase, Lauren.

SAUNDERS: Right. Well, you're looking to buy something, and you think, can I afford it or not?

MARTÍNEZ: Yeah.

SAUNDERS: And you see this option, hey, pay 25% right now; pay the rest later. It makes things look cheaper, and stores like it for that reason because people spend more...

MARTÍNEZ: Yeah.

SAUNDERS: ...When they buy it using buy now, pay later.

MARTÍNEZ: And the whole buy now, pay letter thing is a rapidly growing industry. How is Apple Pay Later different from other pay-as-you-go providers or from just an old credit card?

SAUNDERS: Well, Apple Pay Later will be integrated into the Apple Wallet, so it would be very easy to use if you're buying something using an Apple device. They apparently are not going to give you the choice of linking your payments to a credit card, which is a good thing because you don't want to have the worst of both worlds - still paying interest on your credit card. But other than that, I think it'll be pretty similar to the other buy now, pay later products on the market - Klarna, Afterpay, et cetera.

MARTÍNEZ: What kind of consumers use buy now, pay later services?

SAUNDERS: Well, most people who use buy now, pay later do have other credit accounts. They tend to be younger. There is a higher percentage of people who are Black, Latino, females. And they tend to be lower income. A large percentage of people who have 20,000 to $50,000 of income use buy now, pay later.

MARTÍNEZ: And what kind of things are they buying with buy now, pay later?

SAUNDERS: Well, it started primarily with the fashion industry, but really, you can buy, you know, almost anything these days. You can buy airplane tickets, even groceries, certainly clothing, appliances. It's becoming quite widespread.

MARTÍNEZ: Is buy now, pay later regulated by the government like credit cards are?

SAUNDERS: Well, it should be. We think it's basically a credit card. And the Consumer Financial Protection Bureau is looking at that. But right now, the buy now, pay later companies are not giving you the same protections that you have with a credit card. You don't - there is no uniform set of fee disclosures. You don't get the same kind of charge-back protections if you don't get what you paid for. You don't get statements that collect all of your purchases in one place.

MARTÍNEZ: So if I have a dispute with someone that's selling me something, do I have a recourse at all with that?

SAUNDERS: The companies mostly have voluntary policies. And, you know, they do give you the right to dispute something, but it can get tricky if you return an item, but then you still have this loan. It's just not as seamless as it is with a credit card, and you don't have the same legal rights.

MARTÍNEZ: So, Lauren, as briefly as possible, is this overall just helpful for people who can't access traditional credit?

SAUNDERS: I think it's something to be wary of because people tend to use it thinking it's cheaper, but they can end up with a lot of debt that can be more problematic.

MARTÍNEZ: Lauren Saunders is with the National Consumer Law Center. Lauren, thanks.

SAUNDERS: Thank you. Transcript provided by NPR, Copyright NPR.