California DFPI “Buy Now, Pay Later” Credit Report Released
On November 16, California’s DFPI released version 2.0 of its annual report of the California Finance Act (CFL) Licensed Financial Lenders, Brokers and PACE Administrators. The annual report examined unaudited data collected from financiers, brokers and CFL licensed administrators from Property Assessed Clean Energy (PACE), as well as new data from the “Buy Now, Pay Later” or BNPL industry.
The report contained some insightful information about the expansion in BNPL lending over the past year, which appears to have replaced consumer loans between $ 2,500 and $ 10,000 with interest rates of 100% or more. Super high yield loans decreased from 376,645 in 2019 to 36 in 2020, a decrease of over 99%. There was also a significant decline in consumer credit-secured consumer loans, which fell from 106,070 in 2019 to 5,994 in 2020, a decrease of 94.4%. At the same time, however, financiers issued nearly 12 million consumer loans in 2020, up 530% from 2019. Almost 11 million of those loans went to the six largest BNPL lenders. In addition, the number of online consumer credit issued in 2020 increased 1,589% from 664,488 to 11,226,399.
Interestingly, however, the total denomination of online loans rose only 24.18% in 2020, from $ 11.7 billion to $ 14.5 billion. The increased reporting on BNPL credit may be responsible for the majority of the surge in consumer credit, and issues related to the COVID-19 pandemic may also be responsible for some of these changes, but the steep decline in super high-yield and auto-title loans seems to be pointing to it that these loans have fallen out of favor. DFPI also discussed the recent BNPL enforcement actions that required companies to consider a consumer’s ability to repay a loan and that companies imposed interest and fee caps.
The total number of consumer loans issued by financiers, excluding loans from BNPL lenders, decreased a total of 41.1 percent to 1,005,094 from 1,707,651 in 2019. However, the total denomination of these consumer loans increased 94.8 over the same period Percent to $ 111 billion from $ 57 billion. Aside from the BNPL loans, the total nominal amount of consumer loans increased mainly due to the increase in home-secured consumer loans. The number of consumer loans backed by real estate increased 117.2 percent in 2020 to 261,777 from 120,519 in 2019. The total denomination of these consumer loans increased 113.8 percent from $ 47.3 billion to $ 101 billion over the same period. Dollar.
Finally, the report examined PACE’s funding data. The PACE program administrators reported gross income of $ 43,478,875 in 2020 from funding the PACE program evaluation, a decrease of 30 percent since 2019.
Put into practice: As consumer behavior continues to shift towards BNPL products and away from traditional credit products or installment credit options due to a variety of factors, industry participants can expect the DFPI and other regulators to turn their attention here (we saw this trend in a previous Consumer Finance article discussed). & FinTech blog post here).
Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 337