On March 2, 2023, the CFPB published a new report analyzing the financial profiles of Buy Now, Pay Later borrowers. The report finds that consumers using Buy Now, Pay Later were more likely to be using credit cards, payday loans, and other high-interest financial services. The report also indicates that they are also more likely to exhibit measures of financial distress than non-borrowers.
CFPB Director Rohit Chopra said the following in a statement:
“A common misconception of Buy Now, Pay Later borrowers is that they lack access to other forms of credit. Our analysis shows that these borrowers are more likely to use other credit products. Since Buy Now, Pay Later is like other forms of credit, we are working to ensure that borrowers have similar protections and that companies play by similar rules.”
Findings from the CFPB’s Consumer Use of Buy Now, Pay Later report include the following:
Nearly 95% of Buy Now, Pay Later borrowers had at least one credit record in another account, compared to 86% of non-borrowers.
Buy Now, Pay Later borrowers had significantly higher usage in several other loan products when compared to non-borrowers, including retail accounts (62% compared to 44%), personal loans (32% compared to 13%), and student loans (33% compared to 17%).
Black, Hispanic, and female consumers are more likely than average to use Buy Now, Pay Later products, along with consumers with income between $20,001-$50,000.
Among consumers who have open credit or retail cards, personal loans, auto loans, student loans or mortgages, Buy Now, Pay Later borrowers were more than twice as likely to be delinquent on at least one of those products by 30 days or longer.
Eighteen percent of Buy Now, Pay Later borrowers had at least one reported delinquency in another account, compared to 7% of non-borrowers. Delinquency rates were substantially higher for credit (9%) and retail cards (8%) among Buy Now, Pay Later borrowers compared to non-borrowers (3% and 1% respectively).
The report, however, cannot distinguish whether Buy Now, Pay Later usage leads to more delinquencies on other obligations or whether consumers who are already in distress are more likely to use Buy Now, Pay Later loans to pay off higher-interest debt.
Read the CFPB’s press release here.
The full report can be found here.
