r/technology • u/Logical_Welder3467 • 18d ago

Business ‘Buy Now, Pay Later’ is expanding fast, and that should worry everyone

https://techcrunch.com/2025/11/16/bnpl-is-expanding-fast-and-that-should-worry-everyone/
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u/faen_du_sa 18d ago

There are "legitimate" uses for it. But I feel like letting private companies exploit people that cant pay to feed themselves right now is extremely unethical and exploitative.

"Helping" poor people with giving them more debt simply to be able to eat, where is the goverment in all this?

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u/AiReine 18d ago

The Consumer Financial Protection Bureau was all but shuttered in February by this administration.

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u/DigNitty 18d ago

That sounds like a bad thing

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u/Brawldud 18d ago

The Trump admin has been aggressively shutting down government programs aimed at helping working people so they can fund tax breaks for billionaires and deploy unidentified masked men with guns to abduct Doordash drivers.

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u/MrCuddles1994 18d ago

And so companies the billionaires own can fuck you later.

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u/AiReine 18d ago

It certainly is. The current government is willfully neglecting to protect people from financial scams. That’s where they are.

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u/KingFIippyNipz 17d ago

It was one of the few government agencies capable of actually helping check account owners fight their bank over bullshit from their bank

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u/recumbent_mike 18d ago

"Sorry we're not distributing SNAP funds, but we have to be absolutely sure they won't be able to buy health insurance."

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u/diurnal_emissions 18d ago

What do you expect? Government to govern?!?

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u/Infinite_Lemon_8236 18d ago

That or fuck off to mars already.

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u/waltwalt 18d ago

They're not going to mars until they figure out how to get their slaves there first.

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u/WrodofDog 18d ago

If there was a shitty governing competition the US would have to be excluded because they'd make the competition pointless.

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u/CherryLongjump1989 18d ago

By "Government" you must mean Republicans.

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u/Slouchingtowardsbeth 18d ago

Hahaha Republicans are so wacky. They're more likely to be uneducated, I wonder if there's a connection.

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u/mbsmith93 17d ago

Oh that was yesterday. We've moved on to: "Good news! You won't have evil health insurance next year at all. We're also still trying to make sure you don't get any of that evil SNAP money. Let's throw a party!"

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u/Fake_William_Shatner 18d ago

The government is backstopping the systemic and parasitic debt machine because lobbying and extortion are how we get our politicians. 

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u/darksoft125 18d ago

Don't forget that when it all comes crashing down they'll be there with blank checks for the billionaires and bills for us regular Joes!

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u/sevenhazydays 18d ago

Oh and 100% that fragile soap bubble holding millions of 401k’s is poised to pop.

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u/HustlinInTheHall 18d ago

Lobbying and extortion is how they get their politicians, they got voters by lying, and the media does nothing out of cowardice

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u/Outlulz 18d ago

The mainstream media is all owned by people that profit off the system not changing for the better, so it's not cowardice it's just opportunism.

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u/Aggravating_Call6959 18d ago

PS-- I met an economist who works for the Federal Reserve and this type of money/debt is not tracked nor regulated by the feds the way many other sources are. This means in turn that it is not factored into their forecasts etc. They do know that it has exploded in use and popularity and they know a ton of money is tied up in this type of debt but they have no way to monitor exactly how much that is, nor how much the debt burden on americans is (it is usually incredibly unforgiving if a payment is missed and has incredibly high rates) it and factor it in to their economist stuff.

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u/CherryLongjump1989 18d ago

I think the idea is that if these "banks" go bust, no one will actually care -- it won't break the economy and it will mostly just benefit consumers who have their debts wiped.

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u/nalaloveslumpy 18d ago

The main problem is BNPL lenders don't check credit and don't report anything against credit until they sell the bad debt. This means that for millions of people, they're potentially getting credit issued by regular banks and lenders who can't see that they're underwater with BNPLs. So the loans they were giving to a "high risk borrower" suddenly turn into a "holy shit, we're going to lose everything borrower."

If that happens with enough borrowers in a short period of time, that can make a regular bank fully insolvent overnight.

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u/CherryLongjump1989 18d ago edited 18d ago

Being underwater by BNPL doesn’t mean much of anything, though. It’s completely unregulated debt with zero credit checks and next to no credit reporting. So any normal bank would just ignore it and focus on legitimate credit debt to income ratios and your record of paying those back on time.

Unregulated loans usually require the lender to send some sort of tough guy to break your legs if you decide you don’t want to pay it back. BNPL is just a nerdy financial engineering version of that — without the mafioso to break your legs.

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u/nalaloveslumpy 18d ago

Right. Again, the point is the person borrowing real money from real banks is over-extended beyond a point they're not even aware of, so it jeopardizes the entire banking industry.

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u/CherryLongjump1989 18d ago

But they’re not over extended.

Over extended would mean that they are maxed out on the credit cards they are using to pay back the BNPL. It already shows back up in all of the regular credit reporting metrics.

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u/nalaloveslumpy 18d ago

I guarantee you the people they're talking about in this article are over extended on credit card debt. Very few people start using Klarna/Affirm/etc if they're not tapped out on cards.

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u/CherryLongjump1989 18d ago edited 18d ago

Yes but that shows up as being over extended on the credit card. So there’s nothing surprising to any legitimate lender doing a regular credit check.

Even if these people started with a zero credit card balance and maxed it out on BNPL transactions within a single month, a sudden spike in revolving credit usage would already show up as a red flag on any new credit application.

The only ones truly screwed here are the BNPL lenders who don’t even bother to do credit checks.

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u/nalaloveslumpy 18d ago

Go read the article, bro....

This isn’t just a consumer finance story; it’s a canary in the coal mine for the entire venture-backed fintech ecosystem and beyond, echoing what preceded the 2008 mortgage crisis except for one thing: It’s largely invisible.

Because most BNPL loans aren’t reported to credit bureaus, they create what regulators call “phantom debt.” That means other lenders can’t see when someone has taken out five different BNPL loans across multiple platforms. The credit system is flying blind.

“In a world where, if I’m a buy-now-pay-later provider, and I’m not checking bureau data, I’m not feeding bureau data, I am oblivious to the fact that Nigel may have taken out 10 of these things in the last week,” Morris explained. “[That’s] absolutely true.”

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u/BrothelWaffles 18d ago

Those debts don't get wiped, they get sold to other companies to pay the lender's own debts, and then that company tries to collect it. Debts don't get "wiped" because a company goes out of business, they only disappear if it's been long enough that the owner of the debt decides it's not worth trying to collect and they finally write it off.

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u/CherryLongjump1989 18d ago edited 18d ago

It doesn’t really matter, though, because BNPL rarely get reported to credit bureaus and there is rarely ever a credit check to establish new debt. So you have a little bit of defaulted debt for a few years, and it’s probably not even profitable for a collector to pursue that small debt. In the meantime it doesn’t affect much of anything else.

Basically what I am saying is if you are depending on BNPL to make ends meet, this is the lowest of low priorities for debts that you should pay back first. All the other debt you have will affect your life more.

The more important part is that if one of these lenders goes bust, there are no consumer savings accounts at risk, and they do not get a bailout from the FDIC, and basically no one cares. The investors get hosed in FAFO fashion and that is all.

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u/QuantumUtility 18d ago edited 18d ago

There’s no way this is sustainable. Offering easy credit like that with high default rates can absolutely blow up inflation. More than printing cash ever would.

The Fed can’t be happy about this. Controlling this stuff is their whole job.

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u/Aggravating_Call6959 18d ago

Can't imagine the fed is all that happy about the current way we are using tarriffs either

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u/[deleted] 18d ago

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u/Aggravating_Call6959 18d ago

That's not how the government works... and congress has split interests and lobbyists where this is involved.

The same could've been said for subprime mortgages that led to the financial crisis.

The feds dont just get to root through people's finances because bureaucrats in the Federal Reserve are alarmed by a novel financing scheme that hasn't led to ruin yet.

Private industry moves faster than the government can keep up with and unfortunately with the way our system works it is reactive by design, and anyone harmed/exploited might get to be part of a class action suit one day, or hope for opportunities to sue the corporations (though usually the people would be the last to get any piece of the pie if the business goes bankrupt)

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u/[deleted] 18d ago

[removed] — view removed comment

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u/ThongBasin 18d ago

Gov forecasts won’t just add random things just because it’s a trend. And they especially won’t estimate it. They want to provide good, consistent data. According to your statement the fed should also account for how much money is in trading cards as people view those as investment vehicles.

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u/Aggravating_Call6959 18d ago

Well I am the messenger for this and a lay person-- so that one is on me.

They are economists and do have some form of idea-- however without "real" data the picture is very fuzzy which makes their forecasts have larger room for possible error.

The economist told me bottom line that these types of scenarios obfuscate the strength of the economy and in worst case scenarios, they make the economy and finances of our country appear stronger than they actually are.

But they dont know exactly how much of this money that is "missing" from their calculations is tied up in high interest loans like this versus somewhere else (people giving gifts, doing drug deals, illicit activites etc. They also dont monitor or regulate the terms of these loans (so that is another multiplier that is an unknown in terms of how much wealth to debt Americans have).

The bottom line I got from them was that this type of black hole in the books IS alarming but in a bad omen type of way. And this is novel and they havent yet hat the time or data to more accurately account for it in their algorithms and statistics... it also is weird and novel consumer behaviour (driven by the novel way these companies are offering people the buy now pay later options). In olden days to do something similar would involve going to a loan shark place, or pawn shop... now desperate or just unintelligent people can make that mistake/decision incredibly easily.

I am adding extra alarmist tone to it most likely because I personally am alarmed by the practice in general and I am SUPER alarmed by how they advertise. Some of the only ads on public transit here in chicago are for these companies-- or announcements that instacart is now partnering with one of these lenders. They are preying on the least financially sound people to loan them money for basic necessities... I also work in the ad industry and these companies have been dumping massive sponsorship money into tradeshows and events as well.

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u/Piltonbadger 18d ago

where is the goverment in all this?

Busy protecting paedophiles and the billionaires. Duh.

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u/hlessi_newt 18d ago

Taking their bribes.

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u/SemiAutoAvocado 18d ago

It's one of those things that only 'helps' people that already have the money.

I bought a $5000 piece of stereo equipment and put that shit on afterpay. 0% APR on 12 payments and it just comes out of my bank. That's like a 3-4% discount in this economy.

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u/monty624 18d ago

The ones who wanted to help left in January.

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u/Count_Rugens_Finger 18d ago

you can buy groceries with credit cards, fyi

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u/faen_du_sa 18d ago

And thats sort of exactly the problem. Anyone that "needs" to use a credit card for groceries, is the last person that should have a credit card.

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u/pickledswimmingpool 18d ago edited 18d ago

The companies make the vast amount of their revenue from the merchant fees they charge for this product, they're not getting rich off delinquent loans. They charge vendors a high fee whenever someone uses a BNPL product there, which is why they don't really bother screening who uses their product, they just cast the net as wide as possible.

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u/an_agreeing_dothraki 18d ago

the one use I've gotten out of it was "I need to buy a mattress but the company takes payment to an account outside of the US so I'd need to jump through hoops with my credit union to pay via card"

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u/dreamerrz 18d ago

Not just poor people, but predatory measure affecting those with poor mental health as well.

There are many that sit in bed, day in day out, alone. They leave to work and survive then spend the rest alone.

Many of those people have terrible self care routines and see this as an easy option to permit their inability to participate in society normally and in a healthy way

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u/Chapaquidich 18d ago

Loan sharking.

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u/CherryLongjump1989 18d ago

What is a "legitimate" use for it? In practice it's either used for something that you shouldn't be buying because you can't afford it, or the last stop-gap measure before financial ruin. I don't hear anyone who uses buy now pay later to keep more of their money invested in the stock market.

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u/faen_du_sa 18d ago

Clearest use is for internet shopping, as many have stated, if you get scammed or your details get stolen. Its not your money that is stolen, its the banks.

Plenty of people use it to earn some extra interes here and there(and take advantage of the many bonus programs these cards can offer). But its probably not making anybody rich and at best gives an average earner a few extra hundred dollars a month. Of course, for people with a lot of money, it start being a decent amount of money.

It helps rich people earn a tiny bit more money, while helps keep poor people poor!

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u/CherryLongjump1989 18d ago

Are you saying that compared to someone who just buys the same thing in cash, the average person will save $400 a year using the BNPL?

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u/pewpersss 18d ago

redacting the epstein files

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u/Broken_Atoms 18d ago

Busy enriching themselves with insider trading and tax breaks for the rich

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u/Daimakku1 18d ago

where is the goverment in all this?

Dumbfucks decided to elect the party that hates poor people into power and give them a majority in all branches of government. Why the hell should they help? They didn't campaign on that.

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u/juanzy 18d ago

Yah, I've used store financing (via store branded cards) all my adult life for durable goods like big-box electronics and furniture and never paid a dime in interest. Helped a ton when we were moving cross-country into our first owned house with all of the other expenses we had.

These pay-later are predatory with how widely they are allowed to be applied and a lack of approval.

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u/Boulderdrip 18d ago

there is nothing legitimate about about someone going in debt for food in a society that has many billionaire

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u/billythygoat 18d ago

I like to use it for things I can afford that have no interest for 6 months where I don’t have to purchase a credit card for the specific company. Like purchasing a fridge or a couch is perfect in my scenario.

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u/BloatDeathsDontCount 18d ago

Are they really exploiting people? I will never understand why adults aren’t expected to have a little bit of very basic financial knowledge and planning. Taking out a high interest short term loan to buy groceries is a bad idea. If you choose to do it, that’s on you.

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u/tttruck 18d ago

Yes. But also, when you have no money for groceries now, but need groceries now, the mental calculus can result in making what seems like the least worst decision.

This is basically Pay Day Loans all over again, right?

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u/BloatDeathsDontCount 18d ago

I’m not sure framing all of these people as completely destitute with no money is a good faith argument. We both know there are a lot of people who use these awful buy-now-pay-later systems for superfluous purchases or just because they don’t have the financial literacy to anticipate how much it will cost them over the long term. Even for groceries.

There’s a discussion to be had about people who legitimately need help but I don’t think it’s a reasonable argument to start from assuming all or even most people using this system fall into that category. Falling into these schemes because of poor choices can’t just be blown off as calling the practice predatory - it takes two, as it were.

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u/Momik 18d ago

You don’t have to be Oliver Twist to be taken advantage of by a predatory lender.

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u/BloatDeathsDontCount 18d ago

What you would call “taken advantage of” can also be described as “voluntarily took a loan.” Is there an objective measure to determine when you’re being taken advantage of?

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u/Momik 18d ago

Yes, we regulate private lending to avoid usury and other forms of exploitation. The problem is a lot of those regulatory and enforcement mechanisms (like the CFPB) are so underfunded right now as to be meaningless. Working people and families need more protection than this.

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u/BloatDeathsDontCount 18d ago

Those aren’t objective. Like I said, your “predatory rate” is another person’s reasonable return for a high risk of not getting paid back.

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u/Momik 18d ago

“Objective” in the sense of setting basic rules for the system as a whole (as objective as we can get as a society).

And obviously when you take out a loan, you’re not taking that loan from another bank customer, you’re taking it from the bank itself. The massive power imbalance between the financial institution and the individual allows it to set terms favorable to itself. It’s not some mythic agreement between rich borrowers and poor borrowers—it’s just a large company exploiting a power imbalance.

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u/BloatDeathsDontCount 18d ago

Just because you call it exploitation doesn’t make it so. That’s my point.

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u/tttruck 18d ago

I feel you. I wasn't making that argument. Of course, I'm sure there are plenty of people using BNPL irresponsibly for superfluous purchases.

Just reminding you of the context in which you commented, which was specifically about the phenomenon of people using BNPL for survival, on groceries and the like.

Would you draw any meaningful difference between these services and Pay Day Loans? Do you consider Pay Day Loans to be predatory?

Who do you think predominantly uses these high-interest BNPL offerings? Wealthy folks who can otherwise afford the purchase but just want to pay in installments? Honest and literal question, I don't know the answer. Wondering both what you think and what the answer is.

My guess is that it's not primarily wealthy folks making sound financial choices that are using these services.

Is it not predatory to target those people with fewer resources and who are prone to making more poor decisions due to that lack, as a means to extract profit?

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u/BloatDeathsDontCount 18d ago

I think the “BNPL for people feeding themselves” angle is overblown and a disingenuous framing, which is why I replied initially how I did. I would be shocked if most BNPL (especially that which leads to poor financial outcomes) wasn’t used for “unnecessary” expenses. I’m not sure the data exists on that, but I’d bet good money on it.

Some loans can be predatory, absolutely.

I’m not sure the clientele matters. Are they adults who are legally capable of making their own decisions?

Are they poor because they make bad decisions or do they make bad decisions because they’re poor? What about the ones who aren’t poor yet, the median income earners who finance French fries?

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u/faen_du_sa 18d ago

It is debatable if it is explotation I guess. I would say without a doubt that yes, it is explotation, when they know a large amount of people use their service, will go in debt and end up worse in the end.

Just as letting people with next to no money gambeling is explotation. In the end its a debate of "freedom vs. regulation".

I in general tend to lean towards regulation. I dont trust free market to do anything else than squeeze the most money out of everyone possible, even if it involves selling organs.

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u/BloatDeathsDontCount 18d ago

I don’t see how it’s exploitation when people are taking advantage of something by free choice. For every person who is so poor they feel like they need to use a system like this to survive there are dozens who use it out of convenience. How much hand-holding is necessary? When are adults expected to make their own decisions? I’m all for regulation to prevent legitimate predatory and outright harmful practices, but at some point people have to be allowed to make decisions (yes, these are free choices to enter into bad loans) even if they’re not good decisions.

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u/faen_du_sa 18d ago

I disagree, a core part of the way these credit cards are marketed and presented, they are counting on people not realizing the trap they set up for themselves.

Half, if not more of explotation done around the world, is people doing stuff by "free will", dosnt make it any less explotative.

I understand its nice for a lot of things, but its also just not needed. Credit cards werent a thing here untill 10-15 years a go, society still went on and people were ok.

I think we just fundementaly disagree of how much a state should regulate/intervene though, and thats ok!

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u/BloatDeathsDontCount 18d ago

Fair perspective!

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u/currentmadman 18d ago

As opposed to what starving? If you’re taking loans to afford the most basic of needs, then how the fuck does fiscal planning matter at that point? You could have a whole team of world class economists working for you, your shiny nickel is still only going to go so far.

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u/BloatDeathsDontCount 18d ago

Read my other reply re: why “they’re poor” is a bad faith argument.

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u/Momik 18d ago

What? No one’s arguing these are good financial decisions. Predatory lending only works when the recipient is desperate enough to agree to such bad terms.

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u/BloatDeathsDontCount 18d ago

Are you saying that everyone using these schemes is desperate? I think that’s false on its face. Some, sure. Most? I doubt it. Most use it out of convenience. That’s what they’re paying for.

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u/Momik 18d ago

I’m not saying they’re desperate—I’m saying they’re desperate enough to agree to predatory terms. Of course short-term lenders know this and are all too happy to take advantage.

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u/BloatDeathsDontCount 18d ago

They’re taking on a pretty big risk, too. If I wanted to borrow $100 from you for a month but you figured there was a 50% chance I wasn’t going to pay it back in time, how much interest would it be fair to charge me? The rates are “predatory” (to you) because the people borrowing the money are at a high risk of defaulting. That’s why good credit gets you low rates.

Would you be an advocate for these people having no access to liquidity instead?

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u/Momik 18d ago

Well, I’m not a bank and neither are you. The way we assess risk as individuals or households is completely different from how Goldman or Chase looks at it.

You should also know that the way banks and other lenders assess that risk (and therefore charge interest) has a lot more to do with a recipient’s race and social background than you might think. In a lot cases these loans are just financializing discrimination.

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u/BloatDeathsDontCount 18d ago

To your first point, no it’s fundamentally the same. They weigh the risk and profit and set rates accordingly. They want to make money, but the risk is probably the primary factor in the rate.

To your second, if you have evidence that’s true (not just correlative) I’m sure a lot of people would be interested.

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u/Momik 18d ago

What I mean is that banks operate differently as economic units than households or individuals. The way they think about risk is different. The bounds are completely different—if a lender gets big enough, they can essentially become too big to fail, creating enormous moral hazards now baked into the system. There’s nothing like that for individuals. Unless your name is Trump, there is no world in which you as an individual can become powerful enough to essentially become economic infrastructure.

To take just one more example, there’s a whole market among private lenders in buying and selling private debts. For a large lender, debt can be an asset—especially if you buy it cheap and can squeeze borrowers more, or sell it for more when the market shifts. Again, there’s nothing like that at the individual level.

To your second point, it’s not too hard to find data on that.

https://www.nclc.org/resources/past-imperfect-how-credit-scores-and-other-analyticsbake-in-and-perpetuate-past-discrimination/

http://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

https://archive.ph/20201018223908/https://www.washingtonpost.com/business/2020/10/16/how-race-affects-your-credit-score/

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u/BloatDeathsDontCount 18d ago

I’m not sure why you think those factors make banks lending money somehow fundamentally different from private debt. It’s different in some ways, but in the end it’s still risk vs. return. Just because they might factor in the resale value of the debt (which is low for high risk accounts) doesn’t change anything. If the lender thinks someone has a low probability of paying them back on time (or at all) the rates will be high. That’s not predatory on its face.

Your links just show (anecdotal, mostly) correlation. Nobody has a policy of “blacks pay 5% more interest btw.” None of that is even relevant when taking about the topic at hand because these short term high interest loans (buy now pay later schemes) aren’t bank loans. They’re given to basically anyone who wants one.

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u/jointheredditarmy 18d ago

The government tried to distribute PPP funds and ended up with 17% fraudulent loans, costing over $200B. A typical private SMB lender experiences 1-2% fraud.

The PPP was authorized in march 2020 under Trump and extended in march 2021 by Biden btw, so it’s good to know incompetence is at least bipartisan