BNPL Users Struggle With On-Time Payments As Usage Expands

Consumers are increasingly turning to buy now, pay later services for essential purchases, but a growing number of them are failing to meet their payment deadlines.

A recent LendingTree survey revealed that 41% of buy now, pay later (BNPL) users missed a payment in the last year, a significant jump from 34% just one year ago.

This rise in delinquencies occurs alongside a shift in how these loans are used. Approximately 25% of respondents reported using BNPL for groceries, nearly double the 14% recorded in the previous year. Another 16% used the services for restaurant or food delivery orders.

The trend suggests that while BNPL was once seen as a tool for discretionary splurges, it is becoming a lifeline for basic household expenses.

“To see that people are using [BNPL services] to buy something as basic and fundamental as groceries … I think it is a pretty clear indication that a lot of people are struggling,” Capital One co-founder Nigel Morris told TechCrunch at a recent industry conference.

The rise in missed payments is particularly sharp among younger consumers and those with children, with 41% of users admitting they made a late payment in the past year, up from 34% the previous year.

Unlike traditional credit cards, BNPL loans can exist in a bit of a gray area. Because most BNPL lenders do not report to the major credit bureaus, these obligations are often invisible to other creditors. This lack of transparency can lead to loan stacking, in which a consumer simultaneously takes out multiple loans across different platforms.

The Federal Reserve Bank of Richmond has noted that while official delinquency data is scarce, the industry-reported rates may undercount the actual risk. The bank warned that BNPL usage might have spillover effects on other debt, as consumers prioritize BNPL payments to maintain access to the service while neglecting credit card or utility bills.

The landscape for BNPL is also shifting on the regulatory and reporting fronts. FICO announced plans to incorporate BNPL data into its scoring models, which could impact the credit scores of millions of users who were previously unaware their repayment behavior was being tracked.

“However, it’s essential to recognize that these changes take time to fully implement,” LendingTree noted. “For example, not all lenders will upgrade quickly to use the new formula, similar to how many consumers take time to upgrade to a new version of a browser or phone. These things often move slowly.”

ACA’s Take

The growth of BNPL as a primary financing tool for essential expenses represents a fundamental shift in consumer behavior that the ARM industry should monitor closely.

According to a TransUnion survey, 16% of debt collection companies worked BNPL accounts over the last year. As these accounts become more common, agencies should prepare for consumers who may be managing several small, concurrent debts rather than a single large balance.

ACA International members should also stay informed on the evolving regulatory environment. While the Consumer Financial Protection Bureau recently withdrew several guidance documents on BNPL, individual states like New York and California are implementing their own licensing and interest cap requirements, ACA previously reported.

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