Top Banking Watchdog Warns Of 'Buy Now, Pay Later' Risks Amid Explosion In Use 

The US Office of the Comptroller of the Currency - the powerful federal banking regulator - issued guidance to banks and federal savings associations to address the rising risks surrounding the buy now, pay later (BNPL) craze sweeping across consumers. 

BNPL allows consumers to spend money they don't have over several interest-free installments, which are generally unreported to credit bureaus. The overuse and poor understanding of BNPL terms can be disastrous for consumers and lead to overindebtedness. 

OCC's guidance to banks stated they "should maintain underwriting, repayment terms, pricing, and safeguards that minimize adverse customer outcomes and should ensure that marketing materials and disclosures are clear and conspicuous." 

"As the buy-now-pay-later market grows and we enter the holiday shopping season, the guidance confirms our expectation that OCC-supervised institutions offering these products do so in a responsible manner," Acting Comptroller Michael J. Hsu wrote in a statement. 

OCC's guidance to banks to safeguard consumers comes as BNPL usage during Black Friday and Cyber Monday surged to record highs. 

According to the Bank for International Settlements, BNPL is mainly used by folks with low income, lacking education, and under 35. 

BIS warned: "There is evidence from the United States that BNPL users are particularly risky." 

There are many hidden risks of using BNPL, such as missing a payment, which could trigger high fees and interest. 

The higher use of BNPL is no surprise, considering 'Bidenomics' has failed the working poor.