Is Grocery Debt Really "Warm and Fuzzy"
Or an indicator of an economy that is failing many?
I’ve written quite a bit recently about the convenience and ubiquity of Buy Now, Pay Later (BNPL) products such as Sezzle, Klarna, Afterpay and others.
So, a recent piece by
that takes a deep dive into the world of BNPL caught my attention.
Finnegan does a great job of presenting both sides of the BNPL debate. That is, consumer advocates are pointing out all the many risks of the products while proponents and founders of BNPL companies point to the benefits side.
Here’s one of the sections I noticed that is, to me, a cause for concern:
BNPL providers, for their part, hope their product continues to be “top of wallet” while expanding credit to historically underserved groups. “The number one most visited physical retail used by Debit Plus consumers right now is Walmart groceries,” said Levchin. “That’s probably the warmest, fuzziest news I’ve heard about the product so far. We want it to be top of wallet. We want it to be the thing that people take to go shopping for their family to give them financial flexibility.”
What? It’s warm and fuzzy that the economy is NOT working for a large number of Americans? So much so that many use BNPL to finance their grocery purchases? Only a 1 percenter who is profiting off of poverty would feel “warm and fuzzy” about grocery debt.
As I noted in a previous story:
One survey indicated:
32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.
Now, you no longer need to skip buying groceries because you’re carrying too much BNPL debt — you can just buy your groceries with a super convenient (and super risky) financing scheme.
If this doesn’t point to some systemic flaws in our economic system, I don’t know what does.
I’ve written previously about this issue — the prevalence of BNPL at the grocery store.
I can’t say this enough: This is NOT good news. It’s masking gross income inequality. It’s allowing fintech companies to profit off of (rather than offer solutions for) poverty.
It’s just plain bad.
Still Collecting “Rent-a-Tribe” Debt
Jason Mikula in Fintech Business Weekly reports on a consent order in Connecticut that has TrueAccord in trouble for collecting on illegal, high-interest rate loans.
Here’s more:
Digital debt collection startup TrueAccord, backed by marquee investors that include Nyca Partners and American Express, entered into a consent order with the Connecticut Department of Banking late last month to resolve charges it violated state law by collecting on small-dollar, high APR loans originated by lenders affiliated with federally recognized Native American tribes.
The order stems from the result of a recent exam, which found TrueAccord collected on loans illegally originated to Connecticut borrowers by a tribal lender from January 2015 until at least November 2020.
Mikula notes that these “rent-a-tribe” schemes gained popularity in the last decade but appear to waning:
So-called “rent-a-tribe” arrangements that are used to skirt state usury caps to offer high-interest, short-term loans exploded in popularity in the 2010s. But by the end of the decade, the bigger players in the space, including now-notorious Scott Tucker and Dallas-based Think Finance, faced numerous legal actions.
Here’s more on Think Finance.
The fintech industry seems to prefer “rent-a-bank” schemes, such as those used by EasyPay Finance where they use Utah-based TAB Bank’s charter to charge triple-digit interest rates for auto repair loans and puppy loans.