On January 13, the CFPB published a report analyzing consumers’ use of Buy Now, Pay Later (BNPL) loan products. This latest report builds on previous CFPB work related to BNPL lending by pairing a matched sample of BNPL applications and originations data from six BNPL providers with deidentified credit records. The report highlights an increase in the use of BNPL loans, stating that more than one-fifth of consumers with a credit record financed at least one purchase with a BNPL loan in 2022, with over 60 percent of those consumers holding multiple simultaneous BNPL loans at some point during the year and 33 percent of them taking out loans from multiple BNPL providers. The research also reveals that nearly two-thirds of BNPL loans were issued to borrowers with lower credit scores. Among these applicants with subprime or deep subprime credit scores, BNPL lenders approved 78 percent of loans in 2022, yet BNPL default rates remained lower than those for credit cards, which the CFPB in part attributes to the automatic repayment setup of BNPL loans.
The report also states that BNPL borrowers tend to have higher balances on other types of unsecured consumer debt, such as personal loans, retail loans, student loans, and credit cards, suggesting that borrowers with more limited credit are more prone to resorting to BNPL loans. Younger consumers, in particular those aged 18-24, are more likely to use BNPL compared to older age groups. The report concludes by calling for further research into the impact that BNPL products may have on consumers’ financial health as BNPL usage continues to grow.
