The news: Affirm called for a cap on late fees in the buy now, pay later (BNPL) industry, per the Financial Times.

How we got here: Affirm has positioned itself as a leader in legitimizing BNPL lending practices. It was the first BNPL platform to submit data to Experian, TransUnion and FICO. 

Rivals Klarna, Afterpay, and Zip declined to share information with credit bureaus, citing worries that their customers would be penalized for choosing BNPL products.

Why this matters: In calling for limits on fees, Affirm brands itself as a more responsible BNPL product within the unregulated world of alternative credit. Affirm’s CEO Max Levchin also called late fees a sign of weak business practices: “Everyone in the industry who uses late fees is basically just covering up for the fact that they’re not very good at underwriting.” 

Affirm is the biggest BNPL player in the US by volume, per our forecast, and it’s trying to use that position to set the dialogue for the industry. Providers are once again operating in something of a regulatory vacuum after the CFPB scrapped Biden-era BNPL rules—and with the Trump administration seemingly uninterested in crafting new rules, they need to notch up their consumer-friendly rhetoric to avoid jabs from more heavily regulated credit card issuers and other credit providers.  

Our take: BNPL platforms have an opportunity to gain customer loyalty through advertising—and practicing—transperant lending practices. 

Alternative lenders that operate with clear terms can get more consumers to select BNPL financing over revolving credit, especially when young consumers choose the payment method out of perceived safety over credit cards.