BNPL growing as charge-offs and late fees decline: CFPB

• Key insights: A Consumer Financial Protection Bureau report on Pay in 4 buy now/pay later loans found that from 2022 to 2023 loan volume, users and loan amounts expanded while charge-off rates and late-fee frequency declined.
• What's at stake: The report offers validation for the BNPL industry, which has faced criticism for expanding into everyday spending, such as food delivery.
• Expert quote: "The CFPB's latest findings show what we've always known – that BNPL is being used as it was designed, as a fairer, lower-risk alternative to high-cost credit," a Klarna spokesperson told American Banker. 

A new data spotlight report from the Consumer Financial Protection Bureau examining Pay in 4 buy now/pay later loans is offering validation for an industry that has faced criticism as point-of-sale installment lending becomes more ubiquitous. 

Data was collected from six large BNPL providers, including Affirm, Cash App Afterpay, Klarna, PayPal, Sezzle and Zip, on credit they extended in 2022 and 2023, according to the CFPB. Broadly, the CFPB found that charge-off rates and the frequency of late fees declined as loan volumes, loan amounts and the number of users increased. 

The number of Pay in 4 BNPL loans increased by 23% year over year to 335.8 million loans in 2023, totaling $45.2 billion, or a 26% year-over-year increase when adjusted for inflation. That growth rate was slower than in previous years, according to the bureau. 

Growth in loan volume came amid growth in the number of BNPL users, which rose 12% to 53.6 million consumers who took out at least one BNPL loan. This figure is likely overestimated, the CFPB said, because the research did not account for customers that may have multiple Pay in 4 loans with different providers. Most BNPL providers do not report Pay in 4 loans to the credit bureaus. 

Of the four BNPL lenders that charge late fees, the late-fee revenue declined from 2021 to 2023. Nearly $175 million in late fees were assessed and almost $94 million of late fees were collected in 2021 when adjusted for inflation, compared with $136 million assessed and $80 million collected in 2023. 

Charge-off rates also declined, falling to 1.83% in 2023 from 2.63% in 2022, according to the bureau. 

BNPL lenders cheered the findings. 

"We welcome the CFPB's December 2025 report underscoring the continued growth of BNPL and its value to consumers. Zip's strong repayment performance shows our safeguards are effective," Joe Heck, U.S. CEO of Zip Co., told American Banker. "We look forward to being part of the continued conversation to help ensure strong consumer protections across the sector while preserving access to credit for everyday Americans."

A Klarna spokesperson told American Banker that the CFPB's findings "show what we've always known — that BNPL is being used as it was designed, as a fairer lower-risk alternative to high-cost credit. 

"As Americans shoulder $1.23 trillion in revolving credit card debt, Klarna's interest-free BNPL products offer a fundamentally different model: short-term, structured payments with no interest, no revolving debt, and strong guardrails to prevent overextension," the spokesperson said. 

Industry groups also hailed the CFPB's report. 

"This report confirms our own member company data showing that consumers are using BNPL responsibly and repaying in full and on time," said Penny Lee, president and CEO of the Financial Technology Association. "The CFPB's report relies on real transaction data — not survey responses — about true pay-in-four products. BNPL use continues to grow sustainably and meet the needs of Americans looking to manage spending with no interest, revolving balances, or hidden fees." 

Block, which operates Cash App Afterpay, Klarna and Zip Co. are members of FTA. 

The American Fintech Council, of which Affirm is a member, called the findings "encouraging." 

"Importantly, the CFPB's report highlights encouraging signs for the buy now, pay later sector, including a continued decline in charge-off rates," Ian Moloney, chief policy officer at the American Fintech Council, said. "These trends reflect stronger underwriting, and a sustained commitment to consumer protection among responsible BNPL providers. Most importantly, consumers are prudently engaging with BNPL to improve their financial lives. 

"As policymakers evaluate the future of BNPL, it is essential that decisions remain grounded in data, and aimed at creating clear, consistent rules that support responsible innovation and protect consumers."

The report comes amid a boom in BNPL. Klarna went public on the New York Stock Exchange in September and Affirm has hit profitability targets ahead of schedule. It also comes as seven state attorneys general demanded more information from BNPL lenders, and New York State tightened its own rules surrounding BNPL after the CFPB pulled back its oversight of the industry. 

The boom has not come without criticism, particularly surrounding fears that the proliferation of BNPL to everyday spending, such as food delivery service DoorDash, would create debt traps for consumers. 

There is also a risk of loan stacking because BNPL providers do not have visibility whether a borrower has taken out other Pay in 4 loans from other providers, Kevin King, senior director of credit risk strategy at LexisNexis Risk Solutions, told American Banker. 

"BNPL remains a really fantastic way for consumers to get convenient access to affordable credit, so long as it continues to be used in a responsible manner," King said. 

"You tend to have people who want to get in firm camps of either, 'Buy now/pay later is this great gift to consumers,' or, 'Buy now/pay later is this kind of horrible debt trap for consumers,'" King said. "It's all about how people use it, which is not terribly different than any credit product, but this is one that the pathway to potentially getting in trouble is maybe a little bit slipperier than some others." 

—Frank Gargano contributed to this article.