In December 2021, the Consumer Financial Protection Bureau (CFPB) initiated a market monitoring inquiry into the Buy Now, Pay Later (BNPL) industry, a popular short-term, interest-free consumer credit product widely used in online and brick-and-mortar stores. This inquiry was directed towards five BNPL firms, requesting information and data on various aspects of consumer impact, including the reporting of BNPL payment data to consumer reporting companies for inclusion in credit reports. The CFPB expressed concerns about the potential for consumers to accumulate debt by making multiple BNPL purchases across various companies.
Historically, few BNPL lenders reported consumer information to nationwide consumer reporting companies (NCRCs), which could have implications for consumers and the credit reporting system. This lack of reporting may disadvantage BNPL borrowers who make timely payments and seek to build credit, as their payment history may not be reflected in credit reports and scores. Additionally, it could affect lenders’ ability to assess a prospective borrower’s overall debt burden.
The CFPB emphasized the importance of BNPL lenders reporting both positive and negative payment data and advocated for standardized reporting codes and formats tailored to the unique nature of BNPL products. Standardization would facilitate accurate and consistent reporting of BNPL payment information. Furthermore, the CFPB urged consumer reporting companies to promptly incorporate BNPL data into core credit files and ensure its accuracy on consumer reports. Scoring companies and lenders were encouraged to develop models that appropriately account for the unique characteristics of BNPL loans.
While the three largest NCRCs—Equifax, Experian, and TransUnion—have announced plans to accept BNPL payment data, the CFPB expressed concerns about inconsistent treatment across NCRCs. One NCRC plans to implement a BNPL business industry code but allows BNPL lenders to choose their preferred format for reporting payment data, potentially leading to inconsistent reporting impacts. The other NCRCs intend to maintain BNPL data in separate “specialty” files, which may not be reflected in traditional credit reports and scores.
The CFPB suggested resolving these issues through a standardized approach to BNPL data reporting, incorporating feedback from BNPL lenders and credit-scoring companies to address operational and scoring model considerations. The CFPB committed to monitoring the progress of BNPL lenders, NCRCs, and credit-scoring companies as the BNPL market evolves. Additionally, they will revisit this issue in a broader report stemming from their market monitoring inquiry and responses to public comments. Consumers with concerns about BNPL products or other consumer financial services can submit complaints to the CFPB online or by phone.
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