The U.S. Department of Housing and Urban Development should continue to study “buy now, pay later” financing and its potential effects on consumers and Federal Housing Administration-insured mortgage programs, the American Bankers Association said today.
HUD recently requested information on whether BNPL usage affects a household’s risk profile for purposes of mortgage eligibility for FHA-insured mortgage programs. In a letter to the agency, ABA noted that BNPL loans are often not detectable to creditors because such accounts are not captured in borrower credit histories. At the same time, banks report that BNPL providers do not have consistent credit reporting policies, “which means that even when they are reported, the resulting data is incomplete or inconsistent.”
“At this stage, ABA members cannot accurately assess relationships between BNPL usage and indicators of financial vulnerability, such as high credit utilization or overdrafts,” the association said. “Although many institutions report ongoing efforts to gain deeper insights into trends and relationships, this information is only now emerging and is far from clear at the present.”
HUD should continue to collect consistent and robust data on consumer usage and experience with BNPL products, ABA said. “The growing popularity of BNPL products creates a need for more data to inform HUD and FHA lenders’ understanding of the BNPL market.”
