CFPB Says BNPL Loan Values Rise

The size of buy now, pay later loans have increased as more U.S. consumers rely on them, according to a Consumer Financial Protection Bureau study released last week.

The average dollar value of a BNPL loan grew to $848 in 2023 from $745 in 2022, a 14% increase, the agency’s research found.

The bureau unveiled the study — which looked at buy now, pay later loans in 2022 and 2023 — on its website Wednesday with little fanfare.

The Trump administration has vowed to shutter the agency, which has pulled back on enforcement action since Trump took office in January. The bureau previously issued studies on the buy now, pay later industry in 2021 and 2022.

The agency’s latest research found that while BNPL spending grew in 2023, over the prior year, the growth rate for use of the payments method that year was lower than in 2022, compared to 2021.

The total dollar value of loan originations grew 23% in 2023 compared to 2022 (26% when adjusted for inflation), which was a smaller yearly increase than the bureau saw in the past, the study said.

“The volume of BNPL originations continues to grow, albeit at a slower pace than in previous years,” the study said.

The proportion of late fees and charge-offs also declined, the bureau found. In 2023, 4.1% of BNPL loans were assessed a late fee, compared to 5.2% in 2022.

And the loans were more frequently repaid, with 1.83% of loans being charged off or uncollectible in 2023, compared to 2.63% in 2022.

The agency’s research included summary data from six large BNPL companies representing roughly 40% of the point-of-sale financing market in 2023. A disclaimer in the study says that the sample is not necessarily representative of the entire buy now, pay later market.

The six companies included in the study are Affirm Holdings, Block-owned Afterpay, Klarna Group, PayPal Holdings, Sezzle, and Zip.

The findings come at a time when the BNPL industry is the subject of regulatory scrutiny and critical media coverage.

The federal government has largely pulled back on oversight of the BNPL industry this year under the Trump administration after the Biden administration sought to impose more oversight. But a group of senators and state attorneys general sent separate letters in the past month to seven major buy now, pay later players demanding information on who uses their product and how many of them pay late, among other things.

All of the BNPL companies that were the subject of the CFPB study received the letters, in addition to another rival, Splitit.

One industry group said the CFPB’s research vindicates them, showing that very few buy now, pay later users pay late fees, and the minuscule percentage of charge-offs indicates that consumers who rely on the payment method are able to pay back their loans.

“This report confirms our own member company data showing that consumers are using BNPL responsibly and repaying in full and on time,” Financial Technology Association President and CEO Penny Lee said in a statement.

Klarna, Zip, Afterpay and PayPal are FTA members.

The CFPB’s data is nearly two years old and doesn’t fully capture the ways in which consumers grapple with buy now, pay later debt, said Lauren Saunders, associate director of the National Consumer Law Center.

“Late fees and charge-offs are only a partial measure of whether people are struggling,” she said in an email. “Lenders require automatic payments and will be paid even if the payment overdrafts and triggers an overdraft fee, and BNPL payments can leave people short of funds for other expenses.”

More recent data reflects a larger percentage of consumers paying late fees on buy now, pay later transactions, she said. Saunders cited a Lending Tree survey of 2,000 U.S. consumers fielded in early April and released in November that showed 41% of BNPL users had made a late payment in the prior year.

The CFPB’s conclusions come from actual transaction data, rather than survey responses, Lee stressed in her statement.