A recent report from the Consumer Financial Protection Bureau (CFPB) reveals that consumers with subprime and deep subprime credit scores accounted for a significant portion of the Buy Now, Pay Later (BNPL) loans originated between 2021 and 2022. Specifically, 45% of these loans were taken out by deep subprime borrowers, while subprime borrowers accounted for 16%. The average consumer took out 9.5 BNPL loans in 2022, a noticeable increase from 8.5 in the previous year, with many borrowers originating multiple loans simultaneously. The CFPB's study aimed to address a data gap regarding BNPL loans, as these lenders often do not report to credit bureaus. Approval rates for BNPL loans rose to 79% in 2022, with lenders frequently making counteroffers to applicants. Interestingly, despite the lower credit scores, BNPL default rates were significantly lower than credit card defaults, attributed to the structured repayment schedules of BNPL loans. The CFPB's findings suggest a complex relationship between BNPL usage and traditional credit access.
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