When getting to the checkout screen of many retail orders, buyers are frequently given the option to break up payments into installments. This buy now, pay later (BNPL) option is expected to reach $116.67 billion in transactions in 2025, up from $13.88 billion in 2020, according to Emarketer.
With this boom in small-volume borrowing, the Federal Housing Administration (FHA) has been soliciting public input to better understand the implications of BNPL lending on housing affordability and stability, according to the FHA’s request for information (RFI). Its comment period ends Aug. 25.
The National Consumer Law Center (NCLC) issued an issue brief in May, which warned that BNPL users tend to be younger and are disproportionately Black, Hispanic or female, and many are “financially fragile” with lower credit scores; higher, often revolving, credit card debt; and higher balances on other unsecured consumer credit.
Julienne Joseph has been sounding the alarm about the deadline, encouraging trade organizations and lenders to submit comments. Joseph was chief of staff to Department of Housing and Urban Development Secretary Marcia Fudge. She also oversaw the Office of Single Family Housing as the deputy assistant secretary in FHA during the Biden-Harris administration. Joseph now operates JYJ Consulting in the Washington, D.C., area and has been meeting with groups as they prepare responses to the FHA survey.
While it is important to acknowledge that this is a growing trend of alternative credit, Joseph cautioned that “an overreach in policy creation in this space could result in an excessive shrinking of the credit box that may disproportionately affect Black, brown and underserved communities.”
“I applaud FHA’s leadership in proactively seeking industry feedback on access-to-credit policy, especially as it considers the implications of BNPL products,” she said. “Thoughtful engagement with stakeholders strengthens outcomes by building buy-in and ensuring smoother implementation.”
Joseph added: “While an overly narrow credit box risks excluding creditworthy borrowers across all communities, it’s equally important that we provide FHA with the insights needed to craft effective, forward-looking policy. A collaborative approach will help strike the right balance between innovation, access and responsible lending.”
Garth Rieman, director of housing advocacy and strategic initiatives at the National Council of State Housing Agencies, is studying the issue as the group considers how to respond to the FHA’s RFI.
“The rapid growth of BNPL usage, particularly among younger consumers and those with limited credit histories, has created a significant gap between traditional underwriting practices and the reality of modern consumer debt management,” Rieman told Scotsman Guide in an email. “We hope BNPL lenders, the mortgage industry and credit rating agencies develop more comprehensive and transparent record-keeping on BNPL activity and nuanced methods of factoring it into credit reports and underwriting practices.”
While cautioning that significant use of buy now, pay later lending could impact a borrower’s financial capacity without appearing in standard credit reports, Rieman observed that qualified borrowers who use BNPL lending responsibly should not be denied access to mortgage credit.
“BNPL payment history might even help establish good credit,” he stated. “We encourage FHA to develop procedures that assess risk comprehensively and avoid penalizing credit-worthy applicants who use BNPL lending.”
So far, there are 24 public “document comments” showing on the RFI page, with thoughts on how to include the data in debt-to-income ratios (DTI).
Darin Sears responded June 24, summarizing his comments by recommending the FHA update its guidelines to provide more specific guidance on evaluating short-term installment debt — including voluntary BNPL use — within the DTI framework. He also encouraged disclosure of active BNPL accounts as part of the standard mortgage application and underwriting review process.
“Promote consumer education on the potential impacts of BNPL usage on mortgage qualification, especially in the months leading up to a home purchase,” Sears stated. “BNPL can be a useful and manageable credit tool for many consumers. However, as its adoption grows, it is essential that mortgage policy evolves to ensure we are appropriately assessing borrower risk and supporting long-term homeownership stability.”
Another comment from Annmarie Weber “wholeheartedly” supported the inclusion of short-term BNPL loans on consumer credit reports. “This will help to build a credit history for those younger consumers who may be looking to purchase their first home but have limited credit references. Any sort of repayment history is another means by which lenders can assess the creditworthiness of an applicant.”
Other groups, including the Mortgage Bankers Association (MBA), stated they would reserve comment until the Aug. 25 due date.
