NEW YORK—A new term has been coined for buy now, pay later financing, and it’s an issue that concerns many in credit unions: “phantom debt.”
According to Fortune, a Wells Fargo senior economist, Fortune dubbed BNPL debt, “phantom debt,” and further said it has now become a $700 billion “black hole” that economists aren’t accounting for.
“The problem with this, for economists at least, is that the larger BNPL platforms often decline to share their customers' purchasing patterns with some or all credit bureaus, concerned that their customers' activity may ultimately bring down their credit score,” Fortune reminded.
As CUToday.info has reported, both credit unions and the CFPB is concerned about the lack of credit reporting for BNPL debt. During the recent Velera THINK meeting, for example, concerns were expressed over consumers “stacking” BNPL debt without the credit union having any knowledge of it.
‘Some, But Not All…’
BNPL lenders may report some but not all of their data, Fortune reminded.
“For example, in the U.K., BNPL providers are required to share a customer's credit and repayment history for products with a short repayment window or multiple smaller payments across various accounts,” Fortune stated. “This black hole of information between BNPL lenders and credit agencies across the world is why Wells Fargo senior economist Tim Quinlan has coined the term phantom debt.”
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