BNPL companies block credit data for fear of unfair customer sanctions

Credit offices were supposed to start Buy now, pay data later (BNPL) In credit grades, given how the payment method has increased in popularity, but many companies that issue these short -term loans refuse to share their data at the present time.

The main players in the BNPL space, including Klarna and AFterPay, call for a strong consumer protection to ensure that users are not fairly punished if payment data with credit offices is shared.

Questions intensified how this process works after Fico announced in late June that the new Fico 10 BNPL and Fico 10 T BNPL models would be the first of a leading credit registration provider to integrate BNPL data. This step represents what Fico called “great progress in credit registration”, which reflects the increasing role of BNPL in the American credit ecosystem.

Juan Hernandez’s credit chief said in a blog post last week that the company is not currently providing reports to credit offices in the United States and does not have any plans “until we see concrete evidence that BNPL data that reflects the responsible payment behavior will help, does not harm, the credit half of our customers.”

Meanwhile, a spokesman for Klarana Fox Business told the company that the company supports credit reports that benefit from consumers, which is why the company shares data in the UK and loans reports in the United States so that it is visible to consumers but is excluded from credit grades.

Here is the reason for the decrease in the degree of credit in the United States

“Although US credit reporting does not reflect the extent of the use of short -term BNPL products, we look forward to a system in which these products can contribute positively to credit mode for consumers,” the spokesman said.

Although it becomes A quick -growing credit productThese loans, which allow consumers to divide the payments over time, did not historically reach time payments for credit offices, which means that the payment at the specified time did not reinforce the grades. However, if consumers lose payments, it is still possible to punish them with late fees. Clarena said in some cases that he could prevent someone from using his service.

When applying to join Paardpay or evaluate it to a higher extent of spending, the company may conduct a credit examination, which may appear on the customer’s credit report and is visible to other credit providers, according to its website. KLARNA explains on the Internet that it will not only make soft credit checks, which do not affect a person’s credit or be visible to other lenders, when consumers use the wage in four installments, or pay in 30 days or a wage over time, as well as if they apply for the Klarna Card.

Over the past decade, this payment method has witnessed the increase in the demand as an alternative to credit cards. It was initially used on the Internet for retail trade, especially e -commerce, fashion and consumer goods. However, BNPL has since expanded out of clothes and is now used in purchases ranging from electronics and beauty products to grocery stores, home commodities to travel and event tickets. A survey in June 2023 in June 2023, conducted by the Federal Reserve, found that nearly two -thirds of consumers had been introduced to the BNPL product last year.

Buy now, subsequent loans will now provide credit scores for Americans

Given a significant increase in his popularity, experts argue that it is necessary to inform politics and consumers alike about the benefits and risks of these loans, from late fees to the effects of the credit office reports.

Hernandez said: “Beyond merely identifying the eligibility of loans, these grades affect everything from interest rates and insurance installments to housing options and even employment prospects.” “For ordinary Americans, understanding and preserving good credit is not only related to financial health-it becomes a component of the general well-being in modern society. But what if the credit registration system is not able to ensure that the payment responsible for the loans has positively affected the degree of credit for a person?”

For example, afterpay has published a white paper called “modern credit approach”, with a highlight of how to build a traditional credit system on outdated products and assumptions.

Hernandez said in the blog post explaining the white paper, that the current system “is fighting to adapt to new forms of financial behavior – even when these behaviors reflect strong financial health.”

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The paper also says, according to Hernandez, that it is very important for the organizers to adopt alternative data, such as actual time transactions and spending behavior, to create more comprehensive and accurate credit assessments. This would better reflect modern financial facts while ensuring that the worthy individuals are not fairly excluded Of financial opportunities.

It may take at least ten years to fully update the system, and at that time financial behaviors have evolved again – and a new generation of consumers will continue to be deprived by a system that has not been built for them, “adding that a person’s health should be measured through real behavior, such as a person’s profit, save, spend.