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A $160 billion debt nobody tracks
How big it is
Next to credit cards it is small. Americans spend about $3 trillion a year on credit cards. But buy now, pay later is growing at double-digit rates every year, and the lenders typically don't report to credit bureaus.
Who oversees it
Many of the loans are backed by private credit money rather than banks, so they don't get the same level of regulatory oversight as other credit products. Reports of people sliding into trouble are anecdotal, and economists are asking when this becomes a bigger risk.
Rules catch up
Federal rules started to move toward the end of the Biden administration and then stalled under the Trump administration, and some states have begun writing their own. Credit cards followed a similar path: usage exploded in the early days, and the regulation caught up later.
Why does private credit escape bank rules?
Banks face capital requirements and regular examinations from regulators such as the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC, because they hold insured deposits. Private credit funds raise money from investors such as pension funds and insurers, not from insured depositors. They are governed mostly by securities law and the terms of their agreements with investors. Tighter bank capital rules after the 2008 financial crisis pushed some lending outside banks.
How did credit cards get regulated after exploding?
Diners Club launched in 1950 and BankAmericard followed in 1958, and card use spread fast through the 1960s. Banks mailed unsolicited cards to households in huge numbers, and Congress banned the practice in 1970. The Truth in Lending Act of 1968 had already required lenders to disclose finance charges. The Credit CARD Act of 2009 later restricted rate increases on existing balances and required more notice before other changes.
Why does missing credit data worry economists?
Economists track household debt largely through credit bureau data. The New York Fed's quarterly Household Debt and Credit Report, for example, draws on a sample of Equifax credit records. A loan that is never reported to a bureau does not show up in those counts. Official totals can therefore understate how much households owe.
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