CFPB Blogs About standardized credit reports Buy now, pay later

On June 15, the CFPB published a blog titled “Buy Now, Pay Later and Credit Reports” discussing the Bureau’s perspective on the importance of Buy Now Pay More companies providing standardized data. later (BNPL) to consumer information companies for inclusion in consumer reports. credit reports. BNPL products offer consumers an interest-free, short-term credit option and are widely used for purchases online and, increasingly, in physical stores. The CFPB recently expressed concern about the growing BNPL credit industry, noting the potential for consumers to accumulate debt by making multiple BNPL purchases at several different BNPL companies. (See our previous articles on the December 2021 CFPB BNPL market watch survey here and here).

As a first step, the CFPB is concerned about the lack of data provision by BNPL firms across the industry, noting that until recently few BNPL lenders provided consumer data to credit rating companies. credit. According to the CFPB, by not including BNPL information in consumer credit reports, BNPL borrowers making timely payments are deprived of the benefits that timely payments can have on credit reports and credit ratings, and likewise, lenders (including non-BNPL companies) do not have this information when assessing a potential borrower’s debt.

However, the CFPB warns that inconsistent processing of data between credit reporting companies could undermine the potential benefits of such data sharing. For example, some credit reporting companies plan to keep BNPL data in separate files from the basic credit files used for general traditional credit reporting, and therefore may not be reflected in credit reports and traditional credit ratings. The agency believes that these issues can be resolved by adopting a standardized approach to data provision between BNPL companies.

Put into practice : The CFPB blog post provides another example of the CFPB’s recent focus on the BNPL industry. As the industry continues to grow, BNPL companies can expect the CFPB to continue its monitoring efforts. Although no formal regulations have yet been published, BNPL lenders can stay ahead of the curve by self-monitoring and developing best practices in line with the CFPB’s consumer protection objectives.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 178

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