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The CFPB Thursday released a report on the financial profiles of consumers who use Buy Now, Pay Later (BNPL) programs. The bureau found that these borrowers often exhibit higher measures of financial distress compared to non-borrowers. NAFCU has flagged concerns with these unregulated programs, calling on the bureau to ensure companies that offer them have adequate oversight and consumer protection practices.

Among BNPL borrowers, some examples of financial distress include having:

• higher credit card debt and utilization rates;
• a higher likelihood of having an overdraft;
• a higher likelihood of revolving on at least one credit card; and
• higher utilization rates of alternative financial services like payday loans that charge high interest rates.

Of note, 18 percent of BNPL borrowers had at least one reported delinquency in another account, compared to 7 percent on non-borrowers. BNPL borrowers were also more likely to have lower credit scores, with their average score in the sub-prime category. The bureau noted that for borrowers with lower credit scores, which can lead to higher interest rates on traditional credit products, “Buy Now, Pay Later loans with no interest [are] an attractive alternative that many borrowers seek.”

NAFCU will monitor guidance, rulemaking, and any supervisory action from the bureau regarding BNPL and will continue to advocate for a level playing field for credit unions in the BNPL market.