The Consumer Financial Protection Bureau (CFPB) released a new blog post titled “Buy Now, Pay Later and Credit Reporting” intended to outline expectations for the Buy Now, Pay Later (BNPL) industry.
In December 2021, the CFPB issued orders to five (5) BNPL companies concerning their BNPL products. BNPL is a type of short-term financing that allows consumers to make purchases and pay for them at a future date over a series of installments. BNPL products have become increasingly popular due to the COVID-19 pandemic and are expected to set new records. The CFPB opened an inquiry into BNPL credit due to concerns over “accumulating debt, regulations arbitrage, and data harvesting” involving the consumer credit market. Specifically, the CFPB is asking these companies to submit information so that the CFPB can report to the public on BNPL industry practices and risks.
In its recent blog post, the CFPB proposes a standardized approach for furnishing BNPL data which would help avoid inconsistent treatment of BNPL data. The CFPB states that when BNPL payments are received that it is important for lenders to “furnish both positive and negative data” and recommends the industry “adopt standardized BNPL furnishing codes and formats appropriate to the unique characteristics of the product.”
Further, nationwide consumer reporting companies (NCRCs) should “incorporate the BNPL data into core credit files as soon as possible and ensure that BNPL data are accurately reflected on consumer reports.” For credit scoring companies and lenders, the CFPB’s message is that they should “build and calibrate models that account for BNPL loans’ unique characteristics.”
The CFPB will continue to monitor the progress of the BNPL lenders, NCRCs, and credit scoring companies and to report on the BNPL issues.
To see the CFPB’s full blog post, please visit this link.