‘Buy now, pay later’ (BNPL) products are more often used by people accessing other forms of credit at the same time, and should be subject to the same rules, according to the Consumer Financial Protection Bureau (CFPB).
A new report from the agency found that almost 95% of BNPL borrowers had at least one other credit product, and were more likely to hold retail credit accounts, personal loans, and student loans.
Users were also “more likely to exhibit measures of financial distress” than non-BNPL users, the CFPB said.
“A common misconception of Buy Now, Pay Later borrowers is that they lack access to other forms of credit,” said Rohit Chopra, CFPB director. “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.”
The CFPB found that 17% of consumers with a credit record used a BNPL loan in the 12 months prior to completing the survey, and 18% of BNPL users “had at least one reported delinquency in another account”.
Black, Hispanic and female consumers were more likely to use BNPL loans, as were people earning between $20,001 and $50,000 a year.
Klarna, a Swedish BNPL service provider, opened its doors to US customers last year.
In a column for Banking Exchange in July last year, Rodney Bain, co-founder of Apexx Global, warned that it was vital for the long-term viability of the BNPL sector to get the technology right to ensure delinquencies do not get out of control.