Loans like “buy now, pay later” may soon play a larger role in your credit performance
Francis Creighton, president and chief executive officer of the Consumer Data Industry Association, a trading group dedicated to the credit reporting industry, said it is important to include late loan repayments in your credit reports so that lenders can have a true picture of the overall loan applicant situation. credit profile. But because the loans are structured differently from traditional loans, he said, the credit bureaus had to solve “technical” issues first in order to add them. “We have to make sure we do it right,” he said.
At the same time, the federal Bureau of Consumer Financial Protection stepped up control over later paying companies. In mid-December, the office I opened the queryby asking the five companies to provide details about them business practices until March 1. The office, citing “explosive increases” in wages later during the pandemic and during the holiday shopping season, said it wanted to better understand the potential benefits and risks to consumers. The agency said it is also concerned about how companies use the data they collect from customers.
The agency noted that if consumers use credit for multiple purchases, they may have trouble tracking payments. “Due to the ease of obtaining these loans,” the agency said, “consumers may spend more than expected.”
Installment payments are usually automatically deducted from debit cards, so buyers may be charged overdraft fees if they do not have enough funds in their account to cover the payment. If buyers pay off installments by credit card, they may charge additional debt and interest on their card if they do not fully pay off the installment balance.
The consumer agency also said loans with late payments provide less protection than traditional credit cards, such as the right to challenge a charge if a product is defective.
Members Congress, as well as consumer groups, called for more supervision of businesses, noting that since installment loans do not use traditional credit control, it is unclear whether borrowers have the ability to repay multiple loans.
Here are some questions and answers about Buy Now, Pay Loan Later:
What should I consider before applying for loans later?
Ms Saunders said consumers should be confident that they will be able to pay off the required installments within the allotted time. With traditional credit cards, customers have a consistent repayment schedule and statement that sums up all fees, but someone with multiple loans to pay off later may have to juggle multiple payment terms. “They definitely want to be sure they are tracking their payments,” she said.