[Federal Register Volume 90, Number 119 (Tuesday, June 24, 2025)]
[Notices]
[Pages 26824-26826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11575]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6547-N-01]


Request for Information Regarding Buy Now Pay Later Unsecured 
Debt

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, Department of Housing and Urban Development (HUD).

ACTION: Request for information.

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SUMMARY: Through this Request for Information (RFI), the Federal 
Housing Administration (FHA), seeks public input to better understand 
the implications of Buy Now Pay Later (BNPL) lending on housing 
affordability and stability. Information gathered in response to this 
RFI will inform HUD's efforts to ensure that FHA single family mortgage 
insurance policies effectively address the evolving financial landscape 
and support the needs of American households.

DATES: Comments are requested on or before August 25, 2025. Late-filed 
comments will be considered to the extent practicable.

ADDRESSES: Interested persons are invited to submit comments responsive 
to this RFI. Copies of all comments submitted are available for 
inspection and downloading at www.regulations.gov. To receive 
consideration as public comments, comments must be submitted through 
one of the two methods specified below. All submissions must refer to 
the above docket number and title. Commenters are encouraged to 
identify the number of the specific question or questions to which they 
are responding. Responses should include the name(s) of the person(s) 
or organization(s) filing the comment; however, because any responses 
received by HUD will be publicly available, responses should not 
include any personally identifiable information or confidential 
commercial information.
    1. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov.
    2. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of

[[Page 26825]]

General Counsel, Department of Housing and Urban Development, 451 7th 
Street SW, Room 10276, Washington, DC 20410-0500.

FOR FURTHER INFORMATION CONTACT: Migdaliz Bernier, Office of Single 
Family Program Development, Department of Housing and Urban 
Development, 451 7th Street SW, Room 9262-9280, Washington, DC 20410-
0500; telephone number 202-402-8051 or (800) CALL-FHA (1-800-225-5342); 
email [email protected]. HUD welcomes and is prepared to receive calls 
from individuals who are deaf or hard of hearing, as well as 
individuals with speech and communication disabilities. To learn more 
about how to make an accessible telephone call, please visit: https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Background

    The U.S. Department of Housing and Urban Development (HUD) is 
committed to supporting responsible homeownership and sound lending 
practices that promote self-sufficiency for all Americans. Consistent 
with HUD's statutory fiduciary duty to mitigate unnecessary risk to the 
Mutual Mortgage Insurance Fund,\1\ the Department seeks to better 
understand how emerging financial products--such as Buy Now, Pay Later 
(BNPL) loans--may affect FHA-approved mortgagees' ability to fully 
evaluate a borrower's financial profile and capacity to sustain long-
term homeownership.\2\
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    \1\ 12 U.S.C. 1708(a)(3).
    \2\ A BNPL loan is generally a zero-interest loan repaid in four 
or fewer installments. It is a type of deferred payment option that 
allows a borrower to split a purchase into smaller installments.
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    Consumer adoption of Buy Now, Pay Later financing is rapidly 
growing and is changing how individuals manage short-term expenses. 
According to the Consumer Financial Protection Bureau's (CFPB) January 
2025 report, Consumer Use of Buy Now, Pay Later and Other Unsecured 
Debt, 21 percent of consumers with a credit record financed at least 
one purchase using a BNPL product from a major provider in 2022.\3\ 
Many of these consumers are ``heavy users'' with more than 60 percent 
of them having multiple simultaneous BNPL loans in 2022.\4\
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    \3\ Available at https://files.consumerfinance.gov/f/documents/cfpb_BNPL_Report_2025_01.pdf.
    \4\ Id. at 22.
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    This elevated credit utilization may reflect constrained liquidity 
that could impact qualifying ratios and risk layering in mortgage 
underwriting, which is of particular concern because most BNPL 
obligations are not reported to credit bureaus. BNPL loans essentially 
create ``phantom debt'' that mortgage lenders may not be readily able 
to detect as needed to fully assess a borrower's outstanding 
obligations or debt management behavior.
    At the same time, the report noted that BNPL loans had lower 
default rates than credit cards. On average, between 2019 and 2022, 
just 2 percent of borrowers defaulted on their BNPL loans, likely due 
to the short repayment terms and automatic payment structures common to 
most BNPL providers.\5\ This suggests that, when used responsibly, BNPL 
products may serve as a lower-risk, short-term credit alternative for 
consumers with limited access to traditional financing.
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    \5\ Id. at 3.
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    The rise of BNPL lending raises important questions about how it 
may impact housing affordability and stability. As consumers take on 
additional short-term debt obligations through BNPL services, their 
capacity to manage housing-related expenses, such as rent or mortgage 
payments, may be affected. At present, FHA's policies would largely 
exclude BNPL's from consideration in underwriting because closed-end 
debts do not have to be included if they will be paid off within 10 
months from the date of closing and the cumulative payments of all such 
debts are less than or equal to 5 percent of the Borrower's gross 
monthly income. Understanding the intersection between BNPL lending and 
housing-related expenses is crucial for determining whether FHA's 
current policies are adequate or if development of BNPL-specific 
policies are warranted for FHA to continue to support financial self-
sufficiency and housing stability.

II. Purpose of This Request for Information

    The purpose of this RFI is to solicit public input on how BNPL 
obligations may affect the ability of FHA lenders to accurately assess 
risk, the impact of BNPL lending on housing affordability and 
stability, and whether policy changes are needed to preserve sound 
mortgage underwriting standards.

III. Specific Information Requested

    HUD welcomes all comments relevant to BNPL loans and their impact 
on housing affordability and stability. We are particularly interested 
in receiving input from interested parties on the questions outlined 
below that may affect FHA borrowers.

BNPL Use and FHA Borrower Risk Profiles

    1. What are the credit and spending profiles of borrowers who 
frequently use BNPL services?
    2. What primary reasons do borrowers cite for choosing BNPL loans 
over other payment methods?
    3. To what extent are borrowers engaging in multiple concurrent 
BNPL loans (loan stacking), and what are the implications of loan 
stacking for their overall debt burden?
    4. What types of repayment issues do borrowers with BNPL debts 
experience (Late fees, defaults, repossessions)?
    5. What financial behaviors set frequent BNPL users apart from 
traditional credit users, and how can this guide FHA risk assessments?
    6. How does BNPL usage vary across first-time buyers, purchase 
loans, and refinances?
    7. How do seasonal spending spikes (e.g., holidays) affect BNPL 
loan stacking among mortgage applicants?

BNPL Impact on Financial Health and Housing Stability

    8. How does frequent BNPL usage affect borrowers' ability to meet 
housing-related expenses, including rent or mortgage payments?
    9. What is the relationship between BNPL usage and indicators of 
financial vulnerability, such as high credit utilization, limited 
savings, or overdrafts?
    10. How do repayment issues (e.g., missed payments or defaults) 
among borrowers with BNPL debts relate to housing instability or loss?
    11. What housing-related expenses are most often sacrificed to 
repay BNPL debts?
    12. How does BNPL reliance relate to early housing instability, 
like missed rent or forbearance?

Visibility in Mortgage Underwriting

    13. How are BNPL obligations currently identified and evaluated by 
mortgage lenders and underwriters?
    14. What challenges do underwriters face with risk assessment and 
loan approvals for borrowers with BNPL debts given that many BNPL 
providers do not report to credit bureaus?
    15. How should BNPL debts be treated in debt-to-income (DTI) 
calculations for mortgage eligibility, especially when obligations are 
not visible in credit reports?

Eligibility for FHA-Insured Mortgage Programs

    16. How might BNPL usage affect a household's risk profile or 
eligibility for FHA-insured mortgage programs?

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    17. What metrics can FHA use to differentiate responsible BNPL use 
from overleveraging?
    18. What usage thresholds (e.g., account count, balance, payment 
history) indicate elevated risk for FHA eligibility?

Data and Research Needs

    19. What data sources or research should HUD consider for 
evaluating the financial impact of BNPL debts?
    20. Are there any efforts to track BNPL trends that could inform 
HUD's understanding of consumer risk?

Policy Recommendations

    21. What policy measures could be implemented to ensure that BNPL 
obligations are appropriately considered in DTI calculations without 
imposing undue burdens on borrowers or lenders?
    22. How can BNPL payment histories be effectively integrated into 
traditional credit reporting systems to help borrowers build credit 
profiles?

Frank Cassidy,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2025-11575 Filed 6-23-25; 8:45 am]
BILLING CODE 4210-67-P