On November 16, the Californian DFPI published Version 2.0 of its Annual Report financial lenders, brokers and PACE administrators licensed under the California Finance Act (CFL). The annual report examined unaudited data collected from CFL licensed clean energy brokers, brokers, and property rated clean energy (PACE) administrators, as well as new data from the buy now industry. pay later ”or BNPL.
The report contained revealing information about last year’s expansion of BNPL loans, which appear to have replaced consumer loans between $ 2,500 and $ 10,000 with interest rates of 100% or more. Very high interest rate loans fell from 376,645 in 2019 to 36 in 2020, a drop of over 99%. Consumer loans secured by an automobile title also saw a significant decline, from 106,070 in 2019 to 5,994 in 2020, a drop of 94.4%. At the same time, however, financial lenders made nearly 12 million consumer loans in 2020, an increase of 530% from 2019. BNPL’s six largest lenders accounted for nearly 11 million of those loans. In addition, the number of online consumer loans created in 2020 increased by 1,589%, from 664,488 to 11,226,399.
Interestingly, however, the total principal amount of online loans only increased by 24.18% in 2020, from $ 11.7 billion to $ 14.5 billion. The increased reporting of BNPL loans may explain the bulk of the increase in consumer lending, and issues related to the COVID-19 pandemic may also explain some of these changes, but the sharp drop in interest rate loans Very high interest and auto title loans would seem to indicate that these loans have fallen into disuse. The DFPI also discussed recent BNPL enforcement actions, which required businesses to consider a consumer’s ability to repay a loan and subject businesses to rate and fee caps.
The total number of consumer loans issued by financial lenders, excluding loans from BNPL lenders, decreased overall by 41.1% to 1,005,094 from 1,707,651 in 2019. However, the total amount in principal of these consumer loans increased 94.8% over the same period to reach $ 111 billion from $ 57 billion. Excluding BNPL loans, the total aggregate principal amount of consumer loans increased mainly due to the increase in consumer loans guaranteed by real estate. The number of consumer loans secured by real estate created in 2020 increased by 117.2% to 261,777, compared to 120,519 in 2019. The total principal amount of these consumer loans increased by 113.8 % over the same period, from $ 47.3 billion to $ 101 billion.
Finally, the report looked at PACE funding data. PACE program administrators reported gross income of $ 43,478,875 from funding the PACE program evaluation in 2020, which is a 30% decrease from 2019.
Put into practice : As consumer behavior continues to shift towards BNPL products away from traditional loan products or installment loan options due to a myriad of factors, industry players can expect that DFPI and other regulators are focusing their attention here (we have discussed this trend in a previous Consumer Finance & FinTech blog post here).
Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 337