California DFPI Buy Now Pay Later Loan report published
November 16, California DFPI released Version 2.0 of his Annual report financial lenders, brokers and PACE administrators licensed under California Finance Law (CFL). The annual report looked at unaudited data collected from CFL licensed financial lenders, brokers and Property Assessed Clean Energy (PACE) administrators, as well as new data from the buy now, pay later or BNPL industry.
The report contained some informative information on the expansion of BNPL loans last year, which apparently replaced consumer loans between $ 2,500 and $ 10,000 with interest rates of 100% or more. Loans with very high interest rates fell from 376,645 in 2019 to 36 in 2020, a decrease of over 99%. Automotive consumer loans also dropped significantly from 106,070 in 2019 to 5,994 in 2020, a decrease of 94.4%. At the same time, however, financial lenders granted almost 12 million consumer loans in 2020, which means an increase compared to 2019 by 530%. Nearly 11 million of these loans fell to the six largest lenders, BNPL. In addition, the number of online consumer loans granted in 2020 increased by 1,589%, from 664,488 to 11,226,399.
Interestingly, total online loans increased by only 24.18% in 2020, from $ 11.7 billion to $ 14.5 billion. Increased BNPL loan reporting may account for most of the growth in consumer loans, and COVID-19 issues may also account for some of these changes, but the sharp decline in ultra-high-interest loans and car loans seems to indicate that these loans have fallen out of favor. DFPI also discussed the recent BNPL enforcement action, which required companies to consider the consumer’s ability to repay the loan, and imposed interest and fee restrictions on businesses.
The total number of consumer loans granted by financial lenders, excluding loans granted by BNPL lenders, decreased overall by 41.1%. to 1 005 094 from 1 707 651 in 2019. However, the aggregate principal of these consumer loans increased by 94.8% over the same period. $ 111 billion out of $ 57 billion. Excluding BNPL loans, the aggregate principal of consumer loans increased mainly due to an increase in the number of consumer loans secured with real estate. The number of consumer loans secured by real estate granted in 2020 increased by 117.2% to 261,777 from 120,519 in 2019. The total principal of such consumer loans increased by 113.8% over the same period, to USD 101 billion from 47 . $ 3 billion.
Finally, the Report examines PACE funding data. PACE administrators recorded a gross income of $ 43,478,875 from the 2020 PACE evaluation funding, a 30% decrease from 2019.
Putting it into practice: As consumer behavior continues to shift towards BNPL products and away from traditional credit products or installment loan options as a result of a myriad of factors, industry participants can expect DFPI and other regulators to focus their attention here (we discussed this trend in an earlier Consumer Finance & Finance article. FinTech blog post here).