With BNPL Industry Oversight in Flux, New CFPB Research Fills a Data Gap

Where We Stand With Bnpl As Changes Loom
  • CFPB research from January 2025 accessed applications, originations, and de-identified credit records from six BNPL providers. 
  • The data revealed that almost 25% of credit account holders used BNPL in 2022 and that frequent BNPL customers tend to overuse other forms of credit.
  • As the Trump administration seeks to turn regulatory skepticism into action in financial services, the study stands as the most comprehensive snapshot of consumer use patterns in the BNPL industry.

It’s typical for a new executive branch to suspend pending regulatory changes subject to review. And that’s precisely what the Trump administration did on January 20 in a presidential memorandum directing agency heads to pause rules in the pipeline but not yet published at the Office of the Federal Register.

Along with everything else, the administration’s action put the Buy Now, Pay Later (BNPL) industry in temporary limbo. But there’s a measure of additional uncertainty in financial services because it comes as the Consumer Financial Protection Bureau (CFPB) faces the prospect of significant reorganization or even dissolution.

Last November 27, Elon Musk — now head of the Department of Government Efficiency — famously called to “delete” the CFPB. While lawmakers and stakeholders considered that step unlikely as the new administration prepared to assume office, President Trump seems focused on acting on his long-standing calls to demolish the so-called “deep state.”

Data From Six Companies Provides Unmatched Industry View

I’ll keep you updated on any regulatory changes with respect to BNPL and other areas of interest in the subprime lending community, of course. If you’re interested, the Brookings Institution promises to track the administration’s activity as its term unfolds.

Meanwhile, as the Biden administration prepared to leave office, the CFPB released a statistical snapshot of the BNPL industry based on data from six leaders in the space: Affirm, Afterpay, Klarna, Paypal, Sezzle, and Zip.

It was no easy feat. Information about BNPL available to outside observers tends to be piecemeal because the industry typically doesn’t report to the credit bureaus.

CFPB figure showing unsecured debt BNPL and non-BNPL users
This figure from the CFPB study appendix shows heavy and occasional BNPL users with more unsecured debt in other categories than non-BNPL users.

The companies use proprietary risk-assessment methods and generally have little use for credit reports.

The CFPB issued market-monitoring orders to collect matched samples of BNPL applications, originations, and de-identified credit records from the six providers in March 2023.

That means the study draws on 2022 data. But you’re not going to find a more comprehensive view of the BNPL landscape. Whether you’re in the industry or watching from afar, the study’s insights will help you assess BNPL products, strategies, and innovations in a dynamic environment of change.

“This matched dataset enables a more complete view of consumers’ unsecured debt obligations and allows us to produce statistics that are representative of the average adult in the U.S. with a credit record,” wrote the study’s authors, Cortnie Shupe and Joshua DeLuca of the CFPB Office of Research. “The majority of BNPL loans originated during this time period did not appear in credit records.”

A Portrait of Financial Struggle

This is an opportunity for practitioners and stakeholders to understand metrics such as use persistence, loan stacking across firms, and total unsecured consumer debt among BNPL customers from a marketplace perspective.

Unfortunately, the picture the data paints is one of financial struggles that don’t seem to improve as a result of using the BNPL product.

For example, among the 21% of eligible consumers (i.e., those with credit records) who financed a BNPL purchase in 2022, the study characterized one-fifth as “heavy users” who originated more than one loan per month on average. A total of 63% had more than one loan outstanding at some point during the study period, and 33% stacked loans across multiple firms.

CFPB figure showing rising credit card utilization rates
Figure showing constantly rising credit card utilization rates in the year prior and the year after first-time BNPL use.

The data makes evident that many folks turn to BNPL because they’re tapped out elsewhere. For example, as approval rates among the six providers increased from 67% in 2020 to 78% in 2021 and 79% in 2022, borrowers with deep subprime credit scores accounted for 45% of originations. Those with subprime scores accounted for an additional 16%.

Furthermore, the heavy users described above held more personal and student loan debt, credit card debt, and debt from “alternative financial services lenders” (meaning payday and installment loan providers) than their peers who did not use BNPL.

Younger BNPL users tend to accumulate more BNPL debt as a percentage of their total debt than older users. Another telling detail is how users’ credit card utilization rates increased on average during the year before they turned to BNPL for the first time.

Originating several BNLP loans at the same time is “a practice that is particularly pronounced during the holidays, when BNPL use tends to spike,” the study’s authors wrote. Increasing utilization suggests decreasing credit availability “could be one-factor motivating BNPL use.”

Future Opportunities for BNPL

The CFPB frequently issues Supervisory Highlights to identify emerging risks, help financial institutions understand their compliance responsibilities, and keep the public apprised of the agency’s work.

The next-to-last set released during the Biden administration (Issue 37) tackled what it called “short-term small dollar lending” and found an abundance of pain points warranting further rulemaking attention:

  • Timely consumer dispute resolution
  • Merchant partners advertising incorrect loan costs or terms
  • Using payment processing glitches associated with past loans to deny future loan access
  • Overencouraging users to tip websites for their services
  • Difficulties in closing accounts and stopping collections

Given that the CFPB undoubtedly constitutes a foundational element of the deep state of the new executive and congressional majority, it stands to reason that a slowdown in addressing Issue 37’s concerns is coming — at the very least.

However, the numbers in the Biden CFPB’s last BNPL snapshot describe an industry where consumers land either because they have few other options or they don’t understand or appreciate the consequences of taking on debt they can’t manage.

That belies the utility of the BNPL product when used as a positive supplement to a considered financial strategy. BNPL provides flexible, low-cost credit to help consumers obtain more of what they want and need. BNPL providers seek customers who keep coming back because the product makes life easier, not more difficult.

The report can’t draw a causal connection between behavior in one financial sphere versus another. We need to learn more about where BNPL fits in the lives of the consumers who use it and whether it helps or hurts.

“The importance of BNPL in the credit profiles of BNPL borrowers underlines the need for further research to understand how this growing financial product causally impacts borrowers’ financial health,” the authors conclude.