Affirm falls 16% as CFPB announces inquiry into buy now, pay later services

• Affirm stock fell as much as 16% Thursday after the CFPB announced an inquiry into buy now, pay later services
• The CFPB is asking for information from five companies to assess risk to consumers.

Buy now, pay later service Affirm fell more than 15% on Thursday as the Consumer Financial Protection Bureau announced an inquiry into the fast-growing segment of the consumer finance market.

The CFPB said in a statement issued Thursday that it was requesting information from five companies — Affirm, Afterpay, Klarna, PayPal, and Zip — and that it has a range of concerns about risks posed to consumers who use their services.

Specifically, the watchdog agency is worried about the ease with which consumers can accumulate debt using buy now, pay later, as well as regulatory oversight, and data harvesting. It is working with regulators in the UK, Germany, Sweden, and Australia as part of the inquiry.

"If a consumer has multiple purchases on multiple schedules with multiple companies, it may be hard to keep track of when payments are scheduled. And when there is not enough money in a consumer's bank account, this can potentially result in charges by both the consumer's bank and the BNPL provider," the CFPB said in its statement.

Affirm stock fell as low as $93.08 as Thursday's session wound down, representing a decline of 16%. With the decline, shares are down about 3.5% year-to-date. The stock was already under pressure from Peloton's recent sell-off, as the connected fitness-gear maker's sales account for a large chunk of Affirm's revenue.

In announcing its probe, the CFPB also said it's concerned about "regulatory arbitrage," with some firms inadequately assessing what disclosure rules or protections apply to them. For instance, the CFPB says that while credit card and buy now, pay later applications may look similar, the protections for consumers differ.

Finally, the CFPB is concerned that data harvesting is making it easier for certain consumers, particularly young shoppers, to be targeted by merchants.

"The Bureau would like to better understand practices around data collection, behavioral targeting, data monetization and the risks they may create for consumers," the CFPB said.