On June 15, the CFPB posted a blog, titled “Buy Now, Pay Later and Credit Reporting” discussing the Bureau’s viewpoint on the importance of standardized data furnishing by buy now, pay later (BNPL) firms to consumer reporting companies for inclusion in consumer credit reports. BNPL products provide consumers with a short-term, no-interest credit option and are widely used for online purchases and, increasingly, brick-and-mortar stores. The CFPB has recently expressed concerns about the fast-growing BNPL credit industry, noting the potential for consumers to accumulate debt by making multiple BNPL purchases across several different BNPL firms. (See our previous posts about the CFPB’s December 2021 BNPL market monitoring inquiry here and here).
As an initial matter, the CFPB is concerned about the lack of data furnishing by BNPL firms across the industry, noting that until recently, few BNPL lenders provided consumer data to credit reporting companies. According to the CFPB, by not including BNPL information in consumer credit reports, BNPL borrowers making on-time payments are deprived of the benefits that timely payments can have on credit reports and credit scores, and similarly, lenders (including non-BNPL firms) are without this information when assessing the debt of a prospective borrower.
However, the CFPB cautions that the inconsistent treatment of the data amongst credit reporting companies could undermine any potential benefits of such data reporting. For example, some credit reporting companies plan to keep BNPL data in separate files from the core credit files used to general traditional credit reports, and thus may not be reflected in traditional credit reports and credit scores. The agency believes that such issues can be addressed by adopting a standardized approach for data furnishing amongst BNPL firms.
Putting It Into Practice: The CFPB’s blog post provides another example of the CFPB’s recent focus on the BNPL industry. As the industry continues to grow, BNPL firms can expect the CFPB to continue its monitoring efforts. Although no official regulations have yet been issued, BNPL lenders can stay ahead of the curve by self-monitoring and developing best practices in line with the CFPB’s consumer protection goals.