The CFPB’s new blog post titled “Buy Now, Pay Later and Credit Reporting” appears intended to send a message about the CFPB’s expectations to industry.
For companies offering buy-now-pay-later (BNPL) products, the CFPB’s message is that “when BNPL payments are furnished [to CRAs] it is important that lenders furnish both positive and negative data.” The CFPB observes that a 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.”
For consumer reporting agencies (CRAs), the CFPB’s message is that it “would also like to see the industry adopt standardized BNPL furnishing codes and formats appropriate to the unique characteristics of the product.” The CFPB cites the recent announcements by the three largest nationwide consumer reporting companies (NCRCs) regarding their plans to accept BNPL payment data. It expresses concern that because the NCRCs’ plans vary, the inconsistent treatment “will limit the potential benefits of furnished BNPL data to consumers and the credit reporting system.” According to the CFPB, use of a standardized approach for furnishing BNPL data would resolve this concern.
The CFPB also tells CRAs that it wants them to “incorporate the BNPL data into core credit files as soon as possible and ensure that BNPL data are accurately reflected on consumer reports” and “encourages NCRCs to incorporate the feedback of BNPL lenders (to reduce operational risk) and the credit scoring companies (to ensure that the unique characteristics of BNPL data can be considered appropriately by scoring models).”
For credit scoring companies and lenders, the CFPB’s message is that they should “build and calibrate models that account for BNPL loans’ unique characteristics.” (With respect to lenders, it is unclear if the CFPB is referring to underwriting models used by lenders or proprietary scoring models.)
The CFPB concludes its blog post by stating that it “will monitor the progress of BNPL lenders, the NCRCs, and credit scoring companies as the BNPL market grows and BNPL lenders choose to furnish information about repayment.” It also states that “in the coming months, we will revisit this issue as part of a broader report on the industry stemming from our market monitoring order and responses to a public request for comments.” (The “marketing monitoring” to which the CFPB refers is the December 2021 orders seeking information that it sent to five companies that offer BNPL products. The “public request for comments” referenced is the January 2022 notice published by the CFPB in the Federal Register seeking public comment to inform its inquiry into BNPL products.)