![]() ![]() “But with no oversight of BNPL providers, it is not immediately clear that savings on financing cost are not offset by fees and penalties.” “When credit card interest rates are north of 21%, it is just common sense for consumers to take reasonable measures to avoid such financing cost,” the report reads. The report notes that buy now, pay later providers are quick to point out that they provide consumers with increased purchasing power and greater control in managing their personal finances. Wells Fargo economists analyzed the growth arc of one of the largest buy now, pay later providers to estimate that the loan values for 2023 will come in around $46 billion. Just two years later, the providers originated 180 million loans totaling over $24 billion in value. ![]() This opens the door for applicants who may not qualify based on their scores, want to avoid maxing out current credit cards or who simply don’t have ample credit history to pass a more in-depth credit assessment.Īnd it’s an option that’s signing on new clients at an incredible pace.Īccording to data compiled by the Consumer Finance and Protection Bureau, the five largest buy now, pay later providers originated 16.8 million loans in 2019 worth about $2 billion. ![]() credit card debt hits all-time high of $1 trillion as rates pass 20%, another recordīuy now, pay later apps can lead to vicious debt cycles - here’s what you need to knowīuy-now-pay-later providers have carved out a consumer financing niche, using real-time “soft” credit inquiries that don’t pull up credit scores, don’t appear on the applicant’s credit report and, should credit be issued, doesn’t report new debt obligations back to credit agencies. “Until there is a definitive measure for it, there is no way to know when this phantom debt could create substantial problems for the consumer and the broader economy,” the report reads.Ĭonsumer economic worries aren’t holding back record spending spree ahead of ’23 winter holidays Wells Fargo economists published a white paper Monday that assessed both the positive and negative attributes of buy now, pay later options for consumers and finds that based on the limited data available, the current state of the multibillion industry is “not a major problem for consumer spending yet.” But, the report warns that bigger issues could be lurking behind a screen of opaque operations and questions whether an “unregulated danger zone” could be lulling customers into “a false security in which many small payments add up to one big problem.” Most, but not all, plans provide interest-free financing through app-based or store-sponsored plans, but hidden fees are not uncommon, nor are steep charges for missed or late payments. A new report attempting to dig into the burgeoning “buy now, pay later” financing market finds a lack of transparency, alongside lax oversight, could be concealing a growing consumer debt issue with negative implications for both individuals and the broader economy.įor the uninitiated, buy now, pay later financing is essentially a digitally-mediated update on once ubiquitous retail layaway plans that allow shoppers to pay for a purchase over time after an upfront payment. ![]()
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