What you need to know about Experian's 'specialty' BNPL credit bureau
New bureau will support responsible lending by reporting BNPL activity to providers
Experian will soon be debuting a bureau specifically devoted to buy now, pay later services, which could create a safer lending environment and allow more consumers to qualify. (iStock)
Experian will soon be debuting a bureau specifically devoted to buy now, pay later (BNPL) purchases and services, and is aiming to provide more transparency to the financial services industry.
The company, which is also one of the three major credit bureaus next to Equifax and TransUnion, stated that its Buy Now Pay Later Bureau will better-protect the financial health of consumers. It said that amid the boom in BNPL usage among consumers, the new bureau will "provide real-time reporting of consumers’ BNPL activity" and furthermore help protect negative impacts to their credit scores.
About 45 million Americans used BNPL services in 2021 and spending on BNPL surged 230% since the start of 2020, according to Experian.
"We are committed to giving BNPL providers the confidence they can report information to us without negatively impacting consumer credit scores," said Greg Wright, executive vice president and chief product officer for Experian Consumer Information Services.
Popular BNPL providers — such as Affirm, Klarna, Afterpay, Sezzle and PayPal — partner with retailers and allow shoppers to split the cost of their online purchases into multiple installments at checkout. These interest-free payments are then generally due within a few weeks after the time of purchase, but missed payments can result in late fees and other penalties.
If you've utilized more than one BNPL service and want to consolidate your debt, you could consider using a personal loan. Visit Credible to find your personalized interest rate without affecting your credit score.
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Experian to share data on consumers’ BNPL history
Experian has worked with some of the largest BNPL providers for close to a decade, but many BNPL accounts are not currently reported to the credit bureaus, the company says. As a result, it's more difficult to assess the risk of lending to consumers.
"Our mission is to drive financial inclusion while ensuring responsible lending and we believe the reporting of BNPL payments plays a critical role in achieving this," Wright said.
Regulators like the Consumer Financial Protection Bureau (CFPB) have also begun taking a closer look at BNPL providers as the use of their services has surged, stating concerns that it may be too easy for consumers to accumulate debt that they're unable to repay.
Experian explains that its "specialty" bureau will help BNPL providers see if consumers are already making payments to other BNPL servicers, and therefore determine if they'll be able to make their payments on new BNPL applications.
If you are trying to pay down balances from more than one BNPL provider, you could consider taking out a personal loan to help consolidate your payments. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.
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Reporting BNPL payments could ease regulators' concerns
The CFPB opened an investigation in December of last year to examine the risks of BNPL services, and sent out orders to multiple providers to submit information that the agency could subsequently report to the public for transparency's sake. The CFPB stated at the time of the investigation that it was concerned with accumulating debt, BNPL regulation and data harvesting.
"Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too," CFPB Director Rohit Chopra had said.
But reporting BNPL payments through Experian’s separate bureau could help ease the concerns about accumulating too much debt, since lenders would be able to see the borrower’s total number of outstanding loans, their amounts and their payment status. This information would be stored separately from a consumer’s traditional credit file that gives them their credit score. It could also help open the door to borrowers without a significant credit history to gain access to BNPL services.
"By gaining a more complete view of consumers’ BNPL repayment behaviors, lenders can provide thin-file or subprime consumers who would otherwise be denied credit with first or second chances," Experian stated.
If you've accuulated debt using one or more BNPL services, you might consider taking out a personal loan to help you consolidate and pay it off. Contact Credible to speak to a loan expert and get all of your questions answered.
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