The Department of Housing and Development is seeking information about the impact that the frequent use of Buy Now, Pay Later (BNPL) products may have on borrowers’ ability to meet housing-related expenses, including rent or mortgage payments. Comments are due on or before August 25, 2025.
“The rise of BNPL lending raises important questions about how it may impact housing affordability and stability,” the department said, in issuing a Request for Information. “As consumers take on additional short-term debt obligations through BNPL services, their capacity to manage housing-related expenses, such as rent or mortgage payments, may be affected.”
HUD noted that use of BNPL services is growing rapidly and is changing how individuals manage short-term expenses.
“BNPL loans essentially create ‘phantom debt’ that mortgage lenders may not be readily able to detect as needed to fully assess a borrower’s outstanding obligations or debt management behavior,” according to HUD. Interestingly, HUD did not expressly address the ramifications of BNPL arrangements with regard to the “ability to repay” requirements applicable to residential mortgage loans.
HUD said that FHA’s policies would largely exclude BNPL loans from consideration in underwriting because closed-end debts are not required to be included if they will be paid off within 10 months from the date of closing and the cumulative payments of all such debts are less than or equal to 5% of the borrower’s gross monthly income.
The department continued, “Understanding the intersection between BNPL lending and housing-related expenses is crucial for determining whether FHA’s current policies are adequate or if development of BNPL-specific policies are warranted for FHA to continue to support financial self-sufficiency and housing stability.”
HUD listed a lengthy series of questions to gather information about BNPL usage, including:
- How does frequent BNPL usage affect borrowers’ ability to meet housing-related expenses, including rent or mortgage payments?
- What are the credit and spending profiles of people who frequently rely on BNPL services?
- Why do borrowers choose BNPL services over other payment methods?
- Are borrowers taking out multiple concurrent BNPL loans—known as loan stacking—and what are the implications for overall debt burden?
- What is the relationship between BNPL use and indicators of financial vulnerability?
- What housing-related expenses are sacrificed to repay BNPL loans?
- How might BNPL usage affect a household’s risk profile or eligibility for FHA-insured mortgage programs?
At the same time as HUD is seeking comments on BNPL services, the CFPB has abandoned its BNPL rule and said it does not intend to issue a new one.
“The Bureau has determined that it does not intend to reissue the BNPL Interpretive Rule because it was procedurally defective and the interpretation included therein applied ill-fitting open-end credit regulations to BNPL products, which are generally structured as closed-end loans,” the CFPB said, in a status report it submitted in a lawsuit filed by the Financial Technology Association.
Meanwhile, CNN reports that FICO plans a suite of credit scores that include BNPL data. It will provide lenders with a window to a borrower’s repayment behavior, CNN reported. FICO would be the first major scoring company to account for BNPL borrowing, according to CNN.
[View source.]
