CFPB Data Shows Subprime Lenders That Consumers Are Using BNPL Products Responsibly

The Consumer Financial Protection Bureau (CFPB) has released the results of its in-depth assessment of the buy now, pay later market, revealing that the frequency of late fees and charge-off rates on BNPL loans have fallen as more consumers make use of the popular alternative method of payment.

For subprime lenders considering introducing a new BNPL program, the bureau’s findings may give them confidence that consumers are using the relatively new payment products responsibly. And other lenders may use the CFPB’s report to justify expanding their BNPL programs to serve a broader audience.

In its report, the bureau took a look at data from six leading firms — Affirm, Cash App Afterpay, Klarna, PayPal, Sezzle, and Zip — that offered BNPL products during the survey period from 2019 to 2023. 

The CFPB found that, from 2022 to 2023, the number of loans from the lenders the agency surveyed grew by 23% while the dollar amount of the loans increased by 26% after adjustments for inflation.

Forecasts estimate that the global market size of BNPL will grow from approximately $23.3 billion in 2025 to more than $83 billion by 2034.

Experts anticipate that the worldwide BNPL market, which is worth more than $23 billion in 2025, will continue to expand in the coming years, reaching more than $83 billion by 2034.

But despite the fact that BNPL programs are becoming more popular, the bureau found that only 4.1% of BNPL loans incurred a late fee in 2023, down from 5.2% in 2022. In addition, charge-off rates for the loans sank to just 1.8% in 2023 after reaching 2.6% in 2022.

A New Investigation Unfolds

Lenders that offer BNPL products may have been on pins and needles over the past few weeks as attorneys general from across the U.S. announced they are conducting an inquiry into how the companies protect consumers.

BNPL providers can use the data from the CFPB’s new report as evidence that consumers are using their products effectively.

Ian P. Moloney, Chief Policy Officer at the American Fintech Council, said that the data from the CFPB contains encouraging signals for companies operating in the BNPL arena, according to a report from American Banker.

“These trends reflect stronger underwriting and a sustained commitment to consumer protection among responsible BNPL providers,” Moloney said. “Most importantly, consumers are prudently engaging with BNPL to improve their financial lives.”

The CFPB’s report is likely to provide a shot in the arm for lenders serving riskier borrowers — lender that have been looking to bolster the reputations of the programs they offer. Validation from an organization that aims to protect consumers may also influence the attorneys general investigating BNPL companies.

“As policymakers evaluate the future of BNPL, it is essential that decisions remain grounded in data and aimed at creating clear, consistent rules that support responsible innovation and protect consumers,” Moloney said.