WASHINGTON (TND) — Buy now, pay later services that have proliferated as online shopping has continued to grow more popular are facing new regulations that will treat them like credit card companies in a move regulators are hoping will offer consumers more protections.

A rule issued this week by the Consumer Financial Protection Bureau will now require buy now, pay later companies to investigate disputes and cover refunds for consumers that have an issue with an item, a policy that some companies already abide by but isn’t industry standard or a regulatory requirement.

It’s one of the first rules issued on BNPL services that are still a relatively new addition to financial offerings available to consumers and are typically linked to websites or apps. Their usage has expanded dramatically in recent years along with trends for consumers to turn to online shopping after the breakout of the pandemic. Higher interest rates for credit cards and inflation have also spurred usage as people are having to stretch budgets further to make purchases.

The rule will go into effect in about two months, and could be the first of several regulatory moves from financial oversight agencies that have taken a more aggressive approach toward banks, credit cards and other services for consumers during the Biden administration.

“It's low-hanging fruit. Is this going to be the biggest issue they could face on trying to oversee what's going on in this industry? Not at all, but it’s an easy for easy one for them to knock out, get done, move on to the next thing,” said Cliff Rossi, a professor of finance at the University of Maryland’s Robert H. Smith School of Business who also worked in high levels of risk management for several large banks. “At the same time, it's a ‘heads-up, we're watching and we'll be monitoring your actions going forward.’”

The industry has been generally supportive of the new rule from CFPB, especially among the companies that already offer dispute services.

“We are encouraged that the CFPB is promoting consistent industry standards, many of which already reflect how Affirm operates, to provide greater choice and transparency for consumers,” the company said in a statement. “We urge other companies that offer buy now, pay later products to live up to the industry’s promise to provide consumers with a more flexible and transparent alternative to other payment options.”

But there are also complaints that BNPL companies should not be treated the same as credit cards, which Klarna argued aims to trap consumers in a cycle of high-interest debt. But an investigation BNPL finished in 2022 found that consumers often turn to BNPL apps to substitute for credit cards.

“It is our hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways,” Klarna said in a statement. “At Klarna, we underwrite every transaction to ensure we only lend to consumers who can pay us back, proven by our global defaults of 1%. This model provides consumers with a transparent and predictable repayment structure, making it easier to manage their finances without the burden of accumulating interest.”

A report by Spherical Insights & Consulting in December estimated the market for BNPL to grow from $25.4 billion in 2022 to $160.7 billion in 2032. But it is hard for economists and policymakers to track exactly how much consumer debt is being taken on through BNPL services because lenders are not required to report to oversight agencies and the loans aren’t sent to credit bureaus.

The new rule does not take any steps to remedy that issue or offer protections for consumers from getting buried in debt from online purchases.

“What they're doing is creating a level playing field here, so I think that was appropriate, but it doesn't solve this larger issue of where it can actually lead people down a path of getting deeper in debt by creating this four-installment payment plan. You can stack these little loans on top of each other and pretty soon you can find yourself deeper in debt than you expected you would be,” Rossi said. “That's one of the issues that the CFPB has not taken on here and they should have.”

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