The Consumer Financial Protection Bureau (CFPB) recently issued its long-anticipated report regarding Buy Now, Pay Later (BNPL) products entitled, “Buy Now, Pay Later: Market trends and consumer impacts.”  

The 83-page report is based on information from five BNPL providers as well as “deidentified submissions in the public CFPB complaint database and publicly available financial filings and other source material from the five firms who received the Bureau’s market monitoring orders.” The report focuses on the following areas: 

  1. Consumer Metrics: This section explores BNPL from the perspective of the consumer “starting at the point of ‘acquisition’ (i.e., the initial interaction between potential borrower and BNPL lender), continuing to the application and underwriting processes, and concluding with the policies and procedures around account management and loan repayment.” Key data collected in this area included that (1) 73 percent of applicants were approved for credit in 2021, up from 69 percent in 2020; (2) The average individual order value (i.e., average purchase amount financed by a BNPL loan) in 2021 was $135, up from $121 in 2020; and (3) 10.5 percent of borrowers were charged at least one late fee in 2021, up from 7.9 percent in 2020. 
  2. Market Metrics and Trends: This section explores the BNPL industry from the perspective of the lenders. The section is divided into three subsections covering top-line origination volumes, unit margins (i.e., the variable revenues earned and expenses incurred on each loan originated), and general business trends.  
  3. BNPL and Consumer Financial Health: This section explores the relationship between BNPL usage and consumers’ short- and long-term financial health. The benefits and risks to the consumer are discussed. The benefits “may lead to two forms of borrower overextension: loan stacking (the risk of overconsumption from BNPL usage at multiple concurrent lenders) and sustained usage (the risk of long-term BNPL usage causing stress on borrowers’ ability to meet other, non-BNPL financial obligations).” 
  4. Takeaways and Risks: This section goes over key takeaways from each section and dives into the potential consumer risks associated with BNPL products including, discrete consumer harms, such as lack of clear disclosures of the loan terms, data harvesting, and overextension. 

As a follow-up to this BNPL report, the CFPB intends to address the three potential consumer risks highlighted in the report, which are discrete consumer harms, data harvesting, and overextension. 

To see the CFPB’s full BNPL Report, please click this link.