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A new report from the US Consumer Financial Protection Bureau (CFPB) reveals increasing reliance on buy now, pay later (BNPL) services among consumers, particularly those with high unsecured debt balances and subprime credit scores.
The study found that more than one in five consumers with a credit record used BNPL loans in 2022, with many borrowers holding multiple simultaneous loans or relying on loans from multiple providers.
The research, which draws on data from six major BNPL companies — Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip — sheds light on the growing appeal of these financing options.
BNPL services allow consumers to break purchases into smaller, often interest-free installments and are marketed as low-risk alternatives to traditional credit cards.
However, the CFPB's findings suggest that borrowers frequently use BNPL services while already managing significant unsecured debt, raising concerns about potential financial strain.
According to the CFPB, in 2022, 21.2 percent of consumers financed at least one purchase using BNPL, up from 17.6 percent in 2021.
Around one-fifth of these borrowers were heavy users, originating more than one loan per month on average. Nearly two-thirds had multiple simultaneous loans during the year, and one-third took out loans from multiple BNPL lenders.
Subprime credit scores
The report highlighted that nearly two-thirds of BNPL loans were granted to consumers with subprime or deep subprime credit scores, with lenders approving 78 percent of these applications.
It also found that BNPL borrowers were more likely than other consumers to hold higher balances on other unsecured debts, including credit cards, personal loans and retail loans.
In addition, many borrowers saw rising credit card utilisation rates before turning to BNPL, indicating that dwindling access to traditional credit options may be pushing some consumers toward BNPL services.
The study also discovered that younger consumers appear particularly reliant on BNPL products.
Among borrowers aged 18 to 24, BNPL purchases accounted for 28 percent of their total unsecured consumer debt during the months they used the service, compared with an average of 17 percent across all age groups.
Lack of transparency
The CFPB expressed concern about a lack of transparency in BNPL reporting — unlike traditional credit products, BNPL loans are rarely reported to nationwide credit reporting agencies.
This limits lenders’ visibility into a borrower’s overall debt obligations and increases the risk of overextension.
This report is part of the CFPB's ongoing efforts to monitor and regulate the rapidly expanding BNPL market.
In May 2024, for example, the regulator issued a rule confirming that BNPL lenders must provide consumers with key legal protections similar to those offered by traditional credit cards.
Previous CFPB studies, in 2023 and 2022, also highlighted concerns about BNPL lending practices and market trends.
