Building the Future of Responsible Credit

Today, Block submitted our response to Senators Warren, Blumenthal, Booker, Duckworth, and Hirono regarding their inquiry into Buy Now, Pay Later services (BNPL). Expanding access to the economy while maintaining the highest standards of responsible lending is critical. The future of credit lies not in perpetuating outdated systems that trap consumers in cycles of revolving debt, but in building transparent, responsive tools that empower financial growth. As a leading provider of BNPL services with Afterpay, Block is committed to working with policymakers to ensure that consumers continue to have access to transparent, consumer-friendly payment solutions.

Buy Now, Pay Later (BNPL) services catalyzed a shift in payments by offering consumers short‑term, interest‑free loans at checkout. Afterpay was a leading force in this wave, scaling across international markets and merchant categories and helping to frame policy and regulatory discussions globally around responsible short‑term credit alternatives. Afterpay’s goal is to create payment and credit options for consumers that are safer, more cost-effective, and more transparent than traditional credit products. The traditional Afterpay Pay-in-4 product enables consumers to buy a product or service (in most cases from an Afterpay merchant partner) and pay for it over time in four installments with no charge for the extension of credit. The results of this model are compelling.

By the numbers – here’s what we’ve seen with Afterpay’s merchant-funded model for traditional Pay-in-4:

• 96% of all Pay-in-4 installments globally are paid on time
• 98% of all global purchases with Pay-in-4 incur no late fees
• Pay-in-4 consumers pay $0 in fees when payments are made on time

Afterpay’s BNPL Pay-in-4 model is fundamentally designed to protect consumers from the revolving debt cycle often associated with traditional credit cards:

• Accounts are paused as soon as a repayment is missed, preventing customers from making additional purchases until they are up to date on their repayments
• Low initial spending limits, based on an individual’s credit, that only increase with consistent, on-time repayment
• Late fees are capped to 25% of the BNPL loan with simple terms that do not let customers attain additional fees and debt
• No reporting to credit bureaus until there is clear evidence that the data submission accounts for responsible and on-time Afterpay customers and does not negatively impact one’s financial score

In just the last few years, we estimate Afterpay consumers saved approximately $1 billion in interest and late fees. Our research shows 63% of Gen Z consumers are actively switching from credit cards due to fees, debt, and lack of transparency. Consumers are reevaluating their relationship with traditional credit, and are no longer willing to accept opaque fees or compounding interest, nor the stress that accompanies it. Instead, they are gravitating toward payment solutions that value transparency and flexibility, and most importantly ones that support their financial health.

The traditional credit system isn't built for today's economy. It relies on outdated data, excludes millions of creditworthy people, and often penalizes those trying to build financial health. We have written extensively on this topic in our white papers, “Block’s Modern Approach to Credit” and “Expanding Financial Access and Inclusion”. Block found in a recent analysis that relying on data from a major credit bureau alone for Afterpay underwriting approvals would have excluded approximately 13% more customers to maintain the same level of risk.

Block also recently launched the Cash App Score pilot. In the Cash App Score pilot, select customers can see a near real-time measure of their financial health inside the app, along with specific actions that can improve their score, what factors are influencing them, and take specific actions to build their financial health. The score reflects actual customer’s behavior - earning, saving, spending, repayment - and updates dynamically.

Block supports proportionate BNPL regulation that balances consumer protection with the promotion of innovation. Among the many aspects of that regulation, Block recommends:

1. BNPL should be clearly defined with the Pay-in-4 model in mind. Traditional “Pay-in-4” loans should be regulated differently than loans with finance charges, which are already regulated under current credit regulation.
2. BNPL products should be regulated consistently, regardless of the type of or size of provider.
3. Regulation should enable dynamic spending limits. Dynamic spending limits are a central consumer protection feature of BNPL and key to the underlying BNPL model.
4. Clear disclosures should be provided. Clear and comprehensive information should be provided to consumers about the product.
5. Payment schedule disclosures should be made available at every transaction, including information on the full cost of the purchase and the repayment schedule including dates and exact payments due on those dates.
6. Credit bureau reporting should not be mandated. Credit checking or reporting should strike the appropriate balance between strong consumer outcomes, responsible lending and financial inclusion.
7. Late payment fees should be disclosed clearly and be reasonable. When customers fail to make a repayment, late payment fees can be applied by BNPL providers. However, regulation should ensure that any fee must be reasonable, proportionate and clearly described for consumers to understand, and disclosed at key points in the customer journey.
8. Consumer protections should be in place to limit a consumer’s debt and ensure their repayment can be a success.

The future of consumer finance should expand access while maintaining the highest protection standards. We believe this is achievable through continued partnership with policymakers, and we look forward to working with Congress to build a framework that modernizes consumer financial protection and serves all Americans.