WASHINGTON–The CFPB said it wants to see information from buy now, pay later financing by consumers included in credit reports.
Noting that in December 2021 it launched a market monitoring inquiry into buy now, pay later (BNPL) solutions offered by five companies, the Bureau said it has been seeking information and data on several key areas of consumer impact, including data furnishing by BNPL firms to consumer reporting companies for inclusion in credit reports.
“We noted that BNPL credit is fast-growing and expressed concerns about the potential for people to accumulate debt by making multiple BNPL purchases with multiple companies,” the CFPB said in a blog post. “Until recently, few BNPL lenders furnished information about consumers to the nationwide consumer reporting companies (NCRCs). This lack of furnishing could have downstream effects on consumers and the credit reporting system. It could be bad for BNPL borrowers who pay on time and may be seeking to build credit, since they may not benefit from the impact that timely payments may have on credit reports and credit scores. It may also impact both BNPL lenders and non-BNPL lenders seeking to understand how much debt a prospective borrower is carrying.”
Positives & Negatives
In the post the CFPB said it believes that when BNPL payments are furnished it is important that lenders furnish both positive and negative data.
“We would also like to see the industry adopt standardized BNPL furnishing codes and formats appropriate to the unique characteristics of the product,” the Bureau said. “Such standardization would in turn facilitate the consistent and accurate furnishing of BNPL payment information. Furthermore, consumer reporting companies should incorporate the BNPL data into core credit files as soon as possible and ensure that BNPL data are accurately reflected on consumer reports. Finally, we’d expect scoring companies and lenders to build and calibrate models that account for BNPL loans’ unique characteristics.”
The Bureau noted the big three credit bureaus, Equifax, Experian and TransUnion, have announced plans to BNPL payment data, but plans vary and it is “concerned that this inconsistent treatment will limit the potential benefits of furnished BNPL data to consumers and the credit reporting system.”
Options Explored
“One NCRC is implementing a BNPL business industry code but allowing BNPL lenders to furnish payment data in the format of their choice, with potential inconsistent downstream impacts on consumers’ credit reports and scores,” the Bureau said. “The other NCRCs are planning to keep furnished BNPL data in “specialty” files that are separate from the “core” credit files used to generate traditional credit reports and may include other more traditional, point-of-sale installment loans. If BNPL data is maintained in these specialty files, these data may not be reflected in traditional credit reports and credit scores.”
Addressing ‘Shortcomings’
The CFPB said the “shortcomings” can be resolved through the standardized approach for furnishing BNPL data described above.
“We will monitor the progress of BNPL lenders, the NCRCs, and credit scoring companies as the BNPL market grows and BNPL lenders choose to furnish information about repayment,” the CFPB said. “In the coming months, we will revisit this issue as part of a broader report on the industry stemming from our market monitoring order and responses to a public request for comments.”
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