The buy-now-pay-later industry continues to grow in popularity. And part of the reason is consumers are starting to understand that most of BNPL stands outside the traditional credit scoring system.
The Wall Street Journal reported this past weekend on the new trend of consumers making regular purchases like groceries and other essentials using BNPL. Part of the reason for this is to avoid having these transactions reported to the credit bureaus as they would be if they used a credit card.
While the credit bureaus gave BNPL companies the option of reporting their transactions to the bureaus most are choosing not to do so. To be fair, the credit bureau system is not really set up for those Pay in 4 transactions given how quickly these “loans” are paid off.
More week needs to be done. BNPL is here to stay and regulators like the CFPB have indicated they are keeping a close eye on the industry. But not much has been done in this area yet.
This is one of the many reasons that cash flow underwriting is gaining in popularity for consumer lenders but that is a story for another day.
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