ABA Warns HUD Against Premature BNPL Policy Changes

The American Bankers Association ("ABA") urged the Department of Housing and Urban Development ("HUD") to refrain from changing underwriting standards for FHA-insured loans until more data is available on the risks associated with Buy Now, Pay Later ("BNPL") products.

In a letter responding to HUD’s request for information, the ABA addressed whether BNPL obligations should factor into FHA mortgage eligibility. The ABA explained that BNPL financing is difficult to identify because repayment activity does not consistently appear in credit histories and is only partially visible in bank statements. The ABA noted that even when such obligations are detected, the data is incomplete and does not reveal terms or repayment obligations, complicating lenders’ ability to evaluate a borrower’s total debt load.

The ABA recommended that HUD continue studying BNPL usage and collecting consistent, high-quality data before revisiting its policies. The ABA stated that HUD, as a federal agency, is uniquely positioned to gather more comprehensive and uniform data than individual lenders can access. The ABA urged HUD to keep the current FHA underwriting formula, which excludes small, short-term debts, in place until more reliable data on BNPL use are available. In addition, the ABA called on HUD to provide lenders with clear guidelines and safe harbors to avoid penalties if borrowers fail to disclose BNPL activity.

The ABA warned that premature regulatory changes could create uncertainty for lenders and reduce credit access for FHA borrowers.