BNPL Lenders Want In On Credit Reports
With Buy Now, Pay Later (BNPL) products continuing to gain in popularity as a payment method for consumers, some in the BNPL industry are now exploring ways to report data about consumers’ repayment of BNPL loans to credit bureaus in ways that help consumers build credit. At present, most BNPL products only report data to credit bureaus when consumers are delinquent on their payments.
“We want to ensure that consumers can use this product to build credit—positive credit—and can show, demonstrate, and believe that if they are individuals using this product responsibly, it will have a positive impact on their score,” Penny Lee, CEO of the Financial Technology Association, told Protocol.
In June, the Consumer Financial Protection Bureau (CFPB) began monitoring the BNPL industry through a formal market monitoring inquiry. In a blog post, the Bureau noted that “until recently, few BNPL lenders furnished information about consumers to the nationwide consumer reporting companies (NCRC’s). This lack of furnishing […] 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.”
Some consumer advocates have argued that BNPL products should be evaluated as a revolving line of credit, but most BNPL companies don’t want to be subject to credit card regulations. Unlike credit cards, BNPL payments are usually bi-weekly, and companies have their own protections against irresponsible use to prohibit users from racking up debt like they would with credit cards.
The big three credit bureaus—Experian, Equifax, and TransUnion—have designated different processes for furnishing BNPL data to FICO and VantageScore. The CFPB, however, is concerned about BNPL companies keeping consumer data for anticompetitive reasons.
“Super apps, BNPL, and embedded commerce all allow for data to be kept within the confines of the tech platform and deepen and secure consumer reliance on these products,” the CFPB blog post said.