Buy now, pay later and credit reports

In December 2021, the Consumer Financial Protection Bureau (CFPB) launched a market surveillance investigation into Buy Now, Pay Later (BNPL). Buy now, pay later is a short-term, interest-free consumer credit product that has become nearly ubiquitous at online point-of-sale and, increasingly, in physical stores. Conducted with five BNPL companies, the survey commissioned information and data on several key areas of consumer impact, including the provision of data by BNPL companies to consumer review companies for inclusion in the credit reports. We noted that BNPL credit is growing rapidly and expressed concern that people could accumulate debt by making multiple BNPL purchases from multiple companies.

Until recently, few BNPL lenders provided consumer information to the National Consumer Information Societies (NCRC). This lack of furniture could have downstream effects on consumers and the credit reporting system. This could be bad for BNPL borrowers who pay on time and may be looking to build credit, as they may not benefit from the impact that timely payments can have on credit reports and credit ratings. It can also impact both BNPL lenders and non-BNPL lenders looking to understand the amount of debt a potential borrower has.

The CFPB believes that when BNPL payments are provided, it is important that lenders provide both positive and negative data. We would also like the industry to adopt BNPL standardized furnishing codes and sizes appropriate to the unique characteristics of the product. Such standardization would in turn facilitate consistent and accurate provision of BNPL payment information. In addition, consumer reporting companies should integrate BNPL data into master credit files as soon as possible and ensure that BNPL data is accurately reflected in consumer reports. Finally, we expect rating companies and lenders to build and calibrate models that account for the unique characteristics of BNPL loans.

In recent announcements, each of the three largest NCRCs—Equifax , Experian and Trans Union — has described its intention to accept payment data from BNPL. However, NCRC plans vary, and the Bureau is concerned that this inconsistent treatment may limit the potential benefits of BNPL-provided data to consumers and the credit reporting system.

An NCRC implements a BNPL commercial industry code, but allows BNPL lenders to provide payment data in any format they choose, with potential inconsistent downstream impacts on consumer credit reports and scores. Other NCRCs plan to keep the data provided by the BNPL in “dedicated” files which are separate from the “core” credit files used to generate traditional credit reports and may include other more traditional installment loans at the point of sale. If BNPL data is kept in these specialized files, this data may not be reflected in traditional credit reports and credit scores.

These shortcomings can be addressed through the standardized approach to providing BNPL data described above. The CFPB recognizes the unique challenges that come with providing BNPL data and encourages NCRCs to incorporate feedback from BNPL lenders (to reduce operational risk) and credit rating companies (to ensure that the unique characteristics of BNPL data can be appropriately accounted for by scoring models).

We will monitor the progress of BNPL lenders, NCRCs and credit reporting companies as the BNPL market develops and BNPL lenders choose to provide repayment information. In the coming months, we will revisit this issue as part of a broader industry report arising from our market surveillance order and responses to a public request for comment. If you have a problem with any consumer financial product or service, including consumer reports and BNPL products, you can file a complaint with the CFPB online or by calling (855) 411-CFPB (2372 ).

Kayleen C. Rice