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A controversial new feature is coming to Apple Pay this year in the US
Apple device users in America will soon have the option to use controversial 'buy now, pay later' loans from Affirm for their purchases.
Affirm - one of the three biggest providers - will be available as a payment option for US Apple Pay users on iPhones and iPads later this year, the companies announced on Tuesday.
'This provides users with additional payment choices, and offers the ease, convenience, and security of Apple Pay alongside the features users love in Affirm – flexibility, transparency, and no late or hidden fees,' Affirm said in a statement to CNBC.
Following the news, shares of Affirm rose by 4 percent in early trading on Tuesday, while Apple shares increased by 2.5 percent.
Consumer watchdogs worry that BNPL services cause Americans to get into debt. Affirm is one of the three main BNPL companies, alongwith Afterpay and Klarna.
'Apple Pay Later' lets buyers split a purchase made with Apple Pay into four equal payments over six weeks.It launched in November. Now Affirm is being added
In November, Apple rolled out its own 'Apple Pay Later' to those aged 18 or older.
Thatmove wsa mired in controversy as experts warned it could land households in crippling debt as they are already grappling with the highest living costs in recent memory.
Apple Pay Later lets buyers split a purchase made through Apple Pay on either an iPhone or iPad into four equal payments over six weeks.
For an approved purchase, the consumer would pay 25 percent of the sum initially and after that 25 percent every two weeks until the full sum is theoretically paid on the sixth week. Apple says it charges 'no interest or fees'.
A report from the Consumer Financial Protection Bureau in September noted that the number of BNPL loans issued grew almost tenfold between 2019, when they first gained traction in the US, and 2021.
In materials promoting the new service, Apple says Apple Pay Later was 'designed with users' financial health in mind'. But advocates are skeptical.
'The very use of the product itself does lead to a decline in financial health,' Nadine Chabrier, senior policy counsel at the Center for Responsible Lending, told DailyMail.com at the time.
A research paper published in October 2022 used the banking data of 10.6 million people to investigate the financial implications of BNPL. It found that users experienced a 'rapid increase in bank overdraft charges and credit card interest and fees, as compared to non-users.'
It also projected that the BNPL industry, currently dominated by Fintech companies including Klarna, Affirm, and Afterpay, will be worth $25billion by 2025.
Chabrier warns Apple is entering a booming but underregulated market. BNPL loans are not classified as 'consumer credit' so are not covered by the Truth in Lending Act - a 1968 federal law created to promote ethical lending.
'They're not required to assess the consumer's ability to repay the loan, they're not required to disclose the APR, which helps the consumer understand how much credit costs, and they're not required to have chargeback and dispute rights that a credit card has,' said Chabrier.