The Federal Housing Administration (FHA) published a request for information (RFI) regarding Buy Now, Pay Later (BNPL) unsecured debt in the Federal Register.  

BNPL loans allow consumers to manage short-term expenses.

“Twenty-one percent of consumers with a credit record financed at least one purchase using a BNPL product from a major provider in 2022,” the Consumer Financial Protection Bureau (CFPB) stated in its January report. “Many of these consumers are ‘heavy users’ with more than 60 percent of them having multiple simultaneous BNPL loans in 2022.”

These loans had lower default rates than credit cards, the report said.

“On average, between 2019 and 2022, just 2 percent of borrowers defaulted on their BNPL loans, likely due to the short repayment terms and automatic payment structures common to most BNPL providers,” the CFPB stated.

FHA wants to better understand how the increased prevalence of BNPL consumer loans may impact the industry’s ability to evaluate borrowers’ overall financial profiles and their capacity for long-term homeownership. 

The RFI seeks input on how BNPL obligations may affect lenders’ ability to accurately assess risk and the impact of BNPL lending on housing affordability, which will help FHA determine whether policy changes are needed to preserve underwriting standards.

FHA welcomes all comments relevant to BNPL loans and their impact on housing stability, but is specifically looking for feedback on the following:

• BNPL use and FHA borrower risk profiles;
• BNPL impact on financial health and housing stability;
• Visibility in mortgage underwriting;
• Eligibility for FHA-insured mortgage programs;
• Data and research needs; and
• FHA policy recommendations.

Comments will be accepted through Aug. 25.