Buy now, pay later loans may soon play a bigger role in credit scores


Francis Creighton, president and CEO of the Consumer Data Industry Association, a professional group for the credit reporting industry, said it was important for late payment loans to be reflected on credit reports in order that lenders can get a true picture of the overall situation of a loan applicant. credit profile. But because the loans are structured differently from traditional loans, he said, credit bureaus first had to solve “technical” issues to add them. “We have to make sure we get it right,” he said.

At the same time, the Federal Office for Financial Consumer Protection has stepped up the examination of late payment companies. In mid-December, the office opened an investigation, asking five companies to provide details of their business practices by March 1. wanted to better understand the potential benefits and risks to consumers. The agency said it was also concerned about how companies use the data they collect from customers.

The agency noted that if consumers use the loans for multiple purchases, they may find it difficult to keep up with payments. “Due to the ease of obtaining these loans,” the agency said, “consumers may end up spending more than expected.”

Installment payments are usually automatically deducted from debit cards, so buyers may be charged an overdraft fee if they don’t have enough money in their account to cover the payments. If buyers pay down payments with a credit card, they can accumulate additional debt and interest charges on their card if they don’t pay their down payment in full.

In addition, the consumer agency said, late payment loans have fewer protections than traditional credit cards, such as the right to dispute charges if a product is defective.

Members of Congress, as well as consumer groups, called for increased monitoring of businesses, noting that because installment loans do not use traditional credit checks, it is not clear whether borrowers have the right ability to repay multiple loans.

Here are some questions and answers about buy now, pay later:

Ms Saunders said consumers should be confident that they will be able to make the required payments within the allotted time. With traditional credit cards, customers have a consistent payment schedule and a summary of all charges, but someone with multiple late-paying loans may have to juggle multiple due dates. “They absolutely want to make sure they keep track of their payments,” she said.

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