The news: Buy now, pay later (BNPL) firms are exhorting the Department of Housing and Urban Development (HUD) not to write new rules about how installment loan histories would affect federal home loan eligibility. 

How we got here: HUD released a request for information to better understand BNPL’s impact on housing affordability and stability, especially from the perspective of Federal Housing Authority (FHA) lenders’ ability to accurately assess risk. 

The housing agency hopes to take its findings to develop new policies for federal loan eligibility. 

BNPL response: The American Fintech Council’s senior vice president, Ian P. Moloney, said that the BNPL industry’s “robust disclosure and underwriting practices,” coupled with low default rates, means there’s no need for new rules. 

FTA CEO Penny Lee pointed to FICO’s incorporation of BNPL data as “encouraging” and advocated for “model development that allow consumers to build credit through their BNPL use.”

Industry contradictions: At the moment, only Affirm furnishes data to credit bureaus. 

Klarna and Afterpay said they won’t share customers’ loan information until they can guarantee their users won’t be penalized for seeking BNPL financing. Ironically, that reluctance could end up hurting their consumer base’s ability to get FHA loans. 

Our take: BNPL providers are divided on whether furnishing their loan information supports or hurts their espoused mission for financial inclusion and helping consumers access credit. 

Affirm appeared the odd one out by offering more transparency about its consumers’ financial health. However, if HUD moves ahead with new loan eligibility rules, its customers could end up the better for it, while reporting naysayers Klarna and Afterpay will have to scramble to set up their customers for success.

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