On Friday 13 January, the CFPB released its latest report on consumer BNPL usage.

The report casts light on what has been coined “phantom debt” - the amount of BNPL debt in the market, which is generally not reported to credit bureaus and therefore invisible to lenders. 

The findings of the CFPB from these representative datasets have clear implications for the industry:

1. BNPL users frequently access more than one provider: one third of BNPL users have accounts with multiple BNPLs. The CPFB reiterated its concern with consumer loan stacking (highlights in its 2022 report), now backed up with these data showing the prevalence of multiple accounts. The report notes that BNPL lenders generally cannot observe BNPL loans with other firms, such that loan stacking across firms presents a particular blind spot. We can expect further regulatory pressure on BNPLs to address this shortcoming through stricter reporting standards.

   
   

2. BNPL transaction data is difficult to access. The CFPB obtained the datasets for its report by using its statutory powers, and performed probabilistic matching work to combine these BNPL datasets (which are from 2021-2022)  with traditional credit report data. This is far from ideal - there is a clear need for a secure and reliable reporting platform which captures BNPL transaction data on a real-time basis. 

   
   

3. BNPL is growing and not going anywhere. The report makes clear that the impact and appeal of BNPL as a payment method persists, with over one-fifth of consumers using BNPL as of 2022 (a figure likely to have grown in the past two years). The CFPB notes evidence of some substitution of BNPL for credit cards, although caveats that further research is required in this area. Again, a more complete and up-to-date picture of BNPL data is required to fully interrogate these assumptions.

Qlarifi’s mission is to improve transparency in BNPL transactions, and the CFPB’s research highlights the need for a secure and reliable reporting platform for the BNPL industry. The findings are not surprising: BNPL is increasingly popular, and there are many users who originate transactions with more than one provider. However, for the BNPL product to grow sustainably, there needs to be a more effective method of reporting than a regulator’s survey of data which is now over two years old.

Regulators and industry alike are seeking to understand BNPL more deeply and measure its interaction with other credit products. However, the solution to improved transparency is not necessarily through reporting to the large credit bureaus, whose reporting systems and standards are ill-suited to the challenge. There needs to be a fit for purpose solution for BNPL credit reporting, such as the one that Qlarifi has built.