When the Consumer Financial Protection Bureau issued a rule concerning the growing buy now, pay later industry in March, it said it would treat the installment financing like credit cards, but did not require the loans to be listed on consumer credit reports. That omission leaves the industry and the three big credit bureaus in a stalemate, with the bureaus claiming they are ready to receive the short-term loan data and BNPL players largely choosing not to share it. 

“All of the consumer reporting agencies are prepared, poised and ready and have been for a couple of years,” said Leslie Bender, senior counsel with firm Eversheds Sutherland who focuses on privacy and consumer finance. Bender said that she represents lenders with an interest in this issue, but did not specify which ones. “I don't believe that, overall, the buy now, pay later marketplace has wanted to credit report and there's really been no reason they have to,” she said in an interview last week.

The point of consumer credit reports, like the kind put out by credit bureaus Equifax, Experian and TransUnion, is to “paint an accurate picture of [a consumer’s] economic life,” Bender said. Those concerns led the credit bureaus to start opening the door to BNPL firms to report loan data in late 2021 and early 2022. Then in June 2022, the CFPB stepped in with a blog post requesting the credit bureaus to take a standardized approach to BNPL loans and to start reporting as soon as possible.

Those efforts resulted in just one major BNPL firm, Affirm, reporting loan data to one credit bureau, Experian. Bender attributes this lack of progress to a lack of incentive on the part of BNPL companies, who can offer consumers payment plans that will not show up on a credit report. Voluntarily reporting those loans to the credit bureaus could drive away customers, she said.

Affirm, for its part, said in a statement that it was “actively engaged across the industry, including with credit reporting agencies and FICO, to optimize credit reporting for buy now, pay later transactions” but did not go into detail as to why it did not report to Equifax or TransUnion.

Rival BNPL firm Klarna said in a statement, “we are not sharing BNPL data in the US because the bureaus do not currently have proper models to responsibly process the data and ensure good consumer outcomes.” A company spokesperson also pointed to a May letter from founder and CEO Sebastian Siemiatkowski to the New York Federal Reserve Bank offering to share “anonymized, aggregate data on BNPL transactions” with the central bank.

Afterpay and Zip, two of the other large players in the U.S. BNPL market, did not respond to questions about whether they would start reporting to the three credit bureaus in light of the CFPB’s March rule.

On the credit bureau side, Experian, which receives data from Affirm and also received data from tech giant Apple’s scuttled BNPL offering, called Apple Pay Later, said in a statement that it was “in active discussions with leading BNPL providers to expand the reporting of BNPL information.” Experian added that it had already “created a means for BNPL providers to easily report BNPL account information using an industry standard approach.”

Credit bureau Equifax said in an emailed statement that it had “put the infrastructure in place” to receive BNPL loan data, but that “while Equifax encourages BNPL providers to report payment data, pay-in-four loans are not being reported to Equifax today.”

TransUnion did not respond to questions about whether BNPL firms would start reporting loan data to it.

With the credit bureaus and BNPL firms blaming each other for the lack of reporting, it appears it would be up to the CFPB to step in and require the industry to start reporting its loans on consumer credit reports. But that may raise concerns about financial access, Bender said.

“The current view of the CFPB, I believe, is that they want to make financial services equally available to all Americans,” Bender said. And the fact that such loans are not put on a consumer’s credit file gives certain consumers who wouldn’t qualify for other loans access to a form of credit, she said.

The CFPB appeared satisfied with simply creating standards for reporting BNPL loan data and not requiring that data to be shared. In a statement, the agency said it “has not previously taken action to require industry participants to furnish loans to the credit bureaus, and does not envision doing so.”

By James Pothen on July 3, 2024
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