Dive Brief:

• Buy now, pay later company Affirm Holdings will “soon” start offering its installment loans to renters. 
• Affirm will make those services available through a partnership with New York-based financial technology company Esusu, which offers financial education, credit reporting assistance, and emergency zero-interest loans to tenants. The Affirm spokesperson said they could not comment on when the company’s services will officially be available through Esusu.
• “This pilot with Esusu will give eligible renters a flexible option for managing one of their largest monthly expenses,” an Affirm spokesperson said in an emailed statement.

Dive Insight:

The San Francisco-based company is one of the first BNPL players to provide its services to tenants paying their monthly rent.

Nonetheless, Adam Rust, director of financial services for the Consumer Federation of America, noted that BNPL rival Zip already offers its installment loans for rental payments. That said, Affirm “is the first BNPL of its size to do so,” he said.

There is no official announcement about the collaboration, but a drop-down menu on Esusu’s website says the installment loans through Affirm are “coming soon.” 

Some tenants will qualify for zero interest loans, the Affirm spokesperson said.

“It’s a transparent option that offers flexibility for renters to align expenses with their paychecks,” the spokesperson said.

If a tenant applies through Esusu and is approved by Affirm, they are eligible to receive a 0% interest loan to be repaid in two, biweekly installments, the spokesperson said. Esusu and Affirm are not offering interest-bearing loans as part of this program.

“Select renters who choose to use Affirm through Esusu can apply to pay rent in two equal payments every two weeks at 0% APR, with no hidden or late fees, or compounding interest,” the spokesperson said.

April Kuehnhoff, a senior attorney at the NCLC who focuses on tenant protections, expressed concern over the move, worried renters could get trapped in a cycle of debt. 

“There are a lot of questions about how this would work and what this means for consumers and tenants,” she said in an interview.

The partnership was likely made in the name of expansion, Rust said.

“BNPL lenders are under pressure to scale and are seeking to do so through partnerships with companies that share their goals," he said. 

Esusu's website boasts that it offers tenants a way to build credit, which Rust called an admirable goal. “But driving people to fintech lenders could pose issues," he said.

Critics of the buy now, pay later industry have for years conveyed worries over the possibility that BNPL users are encouraged to spend beyond their means.

Using short-term installment loans to pay a recurring bill such as monthly rent may only exacerbate the problem, Kuehnhoff said.

“What happens if you struggle to pay next month’s rent because you’re still paying last month's rent?" she said. 

”We underwrite every application individually and we only approve people for what we believe they can responsibly afford to repay.” the Affirm spokesperson said.

The spokesperson added that company is approaching tenant loans “thoughtfully,” and will continue to evaluate the service with Esusu’s help.

BNPL companies defend their services, saying they provide loans to people who don't have access to traditional credit. Defenders of the industry note that default and charge off rates on buy now, pay later loans are low.

A study from the Consumer Financial Protection Bureau quietly released late last year found that late fees are assessed on 4.1 % of buy now, pay later loans.

Consumer advocates say those default rates don’t take into account consumers who need to put off other payments to keep up with repayment of BNPL loans that may be automatically withdrawn from their bank accounts.