＂No Excuse For IGNORANCE＂ - BNPL Debt EXPLODES To $20B Record High
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Summary
Americans just spent a record $20 billion with buy now, pay later loans to cover their holiday shopping in a move known as stacking. And more people are using the loans than ever before. But what if you missed a payment?
Transcript
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Something that's happening that is not necessarily taxes, but it's really hurting a lot of different
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people is this BNPL concept, buy now, pay later concept that is hurting a lot of people. This one
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story I want to read to you, Rob, what page is that BNPL on? There it is. It's on page 11.
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Americans just spent a record $20 billion with buy now, pay later. Here's what to do if you
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overdid, overdid it yourself. Now I'll read this story. I'm going to give you the quick tips he gives
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in the article. This is a market watch story. As 2026 gets underway, some consumers are facing
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overwhelming debt. This is especially true for those who took out multiple buy now, pay later
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loans to cover their holiday shop in a move known as stacking. And more people are using the loans
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than ever before. Shoppers use the buy now, pay later spend a record $20 billion from November
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1st to December 31st. According to Adobe 2025 holiday shopping trend reports, 9.8% increase
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from 2024. BNPL typically comes in a form of pay in four loans that don't charge traditional interest.
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Although the late fees can be charged if a payment is missed, lenders say the option expands access to
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people who are underserved by traditional credit, but critics say it can lead to worrisome debt
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accumulation. Tom, why is this so concerning? I know you have some charts on how late people are on
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payments, but why is it so concerning to you? So you have to go and kind of go upstream a minute
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and look at it. In the middle of the COVID crisis, I don't know if we have this chart,
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the credit card debt in America reached $777 billion as people paid off a lot of it. And I think that was
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right. Q2, there it is. Q2, 2021, we hit 777. The sharp drop down was because A, we weren't shopping.
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We were locked in our homes. We had lockdowns and everything going. B, people took 1400, 1500,
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$1,700 payments from the government, Pat, and paid down their credit cards. So all of a sudden, here we
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are, Q1 to 2021, we are at $777 billion. That has gone up since we were all allowed to go back outside
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and play. We're now at an all-time high of $1.26 billion as we have the first- Trillion dollars.
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Trillion, $1.26 trillion as we are in the first week of 2026. So that's what's going on with credit
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card debt. Tom, that's a scary sight, just looking at that. Correct. But now here's what happens.
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Along comes BNPL. And BNPL isn't on your credit report. Well, it wasn't on your credit report.
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Whenever you have your credit report run, the industry uses what's called FICO-8. That's how
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they look at your credit report. And if you're paying LifeLock or somebody, they say, hey,
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there's been an inquiry on your credit report. Boom. Meanwhile, over the same amount of time,
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while America is maxing out its credit card, Pat, look what happens to growth of BNPL.
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So people's credit cards were maxed out. This is number of users? Because I can barely read it.
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It says number of users on the left, right? Correct. Okay. So this is basically the number
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of users of BNPL shoots up like a rocket. At the same time, credit card debt is going up to $1.26 trillion
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where it is today. And there was calls in Washington that says, hey, BNPL needs to be
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put on people's credit reports because we want to kind of protect. Some consumers need to be
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protected from themselves. And the only one, a firm said, okay, I will let you know what my pay in for
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statistics are. Pay in four months. A firm agreed to do it. FICO created what's called the FICO score
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10, which includes BNPL. A firm was good. Klarna and Afterpay said, no, we don't want to report it.
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The reason they don't want to report it is because if there's a FICO score out there and there's a way
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to regulate it, then all of a sudden people wouldn't use it. And Klarna and Afterpay wanted people to
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keep using it. Well, what happens? Guess what? Credit cards are maxed. This isn't on your credit
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report. You go into Best Buy. You want to buy that 4K TV for a thousand bucks. They'll say,
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hey, just put on Klarna. Sign here. Do Klarna. Well, guess what? 63% of BNPL users over the last 24
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months now have multiple BNPL accounts. Number one, 41% of BNPL users missed at least
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one on-time payment last year. Did you say 41%? 41% of all BNPL users. This is not the youth.
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This is anybody and everybody that uses BNPL. Everybody, everybody last year missed at least
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one payment. Right. And it gets worse when we go to the youth. Gen Z, the reporting on Gen Z is
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horrifying. 50% of Gen Z BNPL users missed one payment since holiday spending. That's three months
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ago, November, December, January. In the last 90 days, 50% of Gen Z have missed one payment.
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Now, there is a concept that when you miss a payment, doesn't it like the interest goes to
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the roof or the fee is an extremely high fee? You miss a payment, it's wham-bam. And this thing
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becomes, your foot is in the bear trap. Yeah, but what does that mean, wham-bam? I want to know
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exactly what wham-bam means. My understanding is that suddenly you're on an equivalent of a 30%
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a year interest. That's exactly what I was thinking about. So I was thinking, Rob, can you pull up on
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ChatGBT, what happens to BNPLs when you miss the first payment? What happens to the results?
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They'll say, oh, it's just 2% of balance, but you got to multiply that times 24.
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Yeah, 12. It ends up being worse than credit cards if you miss a balance and they make it really
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sneak. I remember we uncovered that before. You usually charge a late fee, okay? So at
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Afterpay Klarna Zip, late fee kicks in quickly. After a few days, some cap total late fees per order.
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Affirm no late fee. Your account is often frozen instantly. Block you from making new purchases.
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Your credit profile may be impacted. Providers that report to credit bureaus,
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in many cases, oh, they're now reporting. Klarna affirming.
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Some plans they report. See, that affirm reports. Klarna is not reporting across the board and not
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reporting to all agencies. So why don't they tell? Hey, if I'm Klarna, I don't really want this on the
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credit report because I'm plan B. And I want people to take the risk on plan B of their own free will.
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Yeah, it's a funny business model. Mark, where are you at with this?
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Well, a couple of things. So first of all, when we look at the credit card debt going up,
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we have to take into account consideration of the inflation. And not just the CPI inflation,
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but the increase in the money supply. So I see here it's gone up by 9.87 or 9.8% since 2024.
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BNPL use. So 9.8 since 2024. But the money supply has increased faster than that.
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So when we look at sheer numbers, we have to take that into consideration, first of all.
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But what I would say to this is it sort of kind of goes back to two things. Number one,
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you referenced some of the news we're going to talk about. One, Trump capping rates. And so when
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lending restrictions get tightened, people will turn to options like this. So you cut rates at 10%
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on credit cards, people are going to go to loan sharks, number one. Number two, the way I think
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about it is you also mentioned- They run out of credit balance.
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Or credit balance. But the other thing I would go back to, as you referenced earlier,
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a new story to get to later is the education system and capitalism. And if people were taught
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how to use debt in a good way, you mentioned good debt versus bad debt. And so we are in a
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debt-based system. We're in a credit-based system. And so we use debt to grow. Donald Trump was the
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king of debt before becoming the president. But if you don't learn how to use it properly,
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it can become extremely dangerous. If you use it properly, it's extremely powerful. So I just see
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a failure in the education system, first of all. I see a failure in the banking system and people are
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turning to this. But overall, yeah, it can end up bad.
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You know, it's amazing how it's so much more difficult a lot of times to get something as
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simple as a small business loan with a solid plan versus being able to have access to $20,000 to $50,000
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worth of credit card debt to do frivolous shopping with. I mean, I never really thought of it like
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that. But it's crazy. Like, it is a much more complicated process to take out a small business
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loan than to get a few credit cards. But it's unfortunate. Like, I always complain about
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government regulation. But now here, this is an example of what happens and why the government
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sometimes has to get involved and protect people because of the, I guess, incompetence of some
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people and the predatory nature of certain companies to put people in a situation like this.
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Because, yeah, these are credit cards. They're loan sharks. They're probably more expensive than
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paying off a credit card when you really boil it down. I remember the rates get up to like 50%
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sometimes if you miss a few payments. So, yeah, it's a disaster.
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But is it the government's job to protect people or are they smart enough to read the paperwork and
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I guess you could say that's survival of the fist to a degree.
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But I agree with Mark. I agree with Mark. Please, Mark, finish your thought.
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Because if they're not going to get this, they're not going to read the paperwork and they're not
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going to read the fine print. That's on them. And if they don't get it there, the government
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protects them from getting it. They'll go to the back alley and they're going to get it from the
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loan shark and they're going to get their legs broken. So it's like they're going to take the
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risk either way. At least it's disclosed and it's transparent. And like, again, it should be on
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them to be smart enough to understand what they're signing. They can take that contract and run
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through ChatGPT today. I mean, there is no excuse for the ignorance of that.
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I agree with that. And I think that one of the good things of the Consumer Protection Bureau is
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to ensure that there is fine print. But I think fine print needs to be regulated because there's
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what's called plain talk fine print. And plain talk summaries, I believe in, where you have to
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pat right there at the top, the plain talk summary, like when you get a car loan, plain talk, you're
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getting this much loan. You will pay this much interest. The vehicle will ultimately cost this,
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cost this, and this will be your payment for these many months. Boom. And here's your interest rate.
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I believe in those plain talk summaries, but it should be on the consumer to read it.
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But I like the fact that we force companies to, hey, put the plain talk at the top and
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the consumer makes a choice. Make the decision for yourself. Yeah, I like that part. But Tom,
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you know what's the weirdest thing I'm looking at? So Rob, can you do me a favor? Go on ChatGPT,
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ask this question. What is the market cap of top BMPL companies the last five years? Okay. Now,
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I want to know if they're going up or if they're going down because I want to know what patterns
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will notice. To me, what it says here is a firm, which is one of them, they went public
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since January of 2021. Look at this. January 2021, $28 billion is early 2021 peak. Look at 2022,
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post-pandemic drop. It drops to $2.8 billion market cap. Nobody was shopping. Yeah, nobody was
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shopping. Then it goes to $14.8 billion, then $20 billion, then $25 billion. It is still not back
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up to the $28 billion it was when they went out in 2021. So then if you go a little bit lower,
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that's a firm. Go to the next one. After pay 2025, block overall market cap has been reported around
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$42 billion. Okay. Pre-2022 after pay market cap was initially $30 billion. Okay. So it's gone up
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say 40%, right? Exactly 40% from $30 billion to $42 billion. Go a little bit lower. Klarna went from
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$45 billion valuation in 2021. Peak, this is when they were private. 2022 is still private. They go to
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$6.7 billion. IPO, 2025, $15.1 billion. And now it's roughly $11 to $12 billion. Now here's what this
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makes me think about. Do I think this is something that's going to be around 20 years from now?
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Maybe, maybe not. I don't know. And the reason why I'm asking this is, remember when everybody was
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looking at how fast Groupon was blowing up and there was another company- Living Social.
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Yeah. Living Social. Like Living Social. Tom, we even had a meeting one time in Woodland Hills,
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California in 2011, 2012, that we were going to launch our own Groupon Living Social. Do you
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remember the name of it? I mean, let me see if you remember the name of it. Do you remember the name
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of it? If you remember the name of it, dinner's on me, Tom. I do not remember that. It was called
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Goody Squad. Oh, Goody Squad. It's called Goody Squad. We had all these, you know, personalities and
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this stuff. Remember I had this meeting. I brought all of you guys in. It was like a CEO of a
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massive insurance company. Einstein, the little white dog. Yes. Yes. So we had this thing. We're
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going to do Goody Squad and everybody's looking at me saying, yeah, I don't know about it. We never
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ended up doing anything with it. But, but the point is, is this a Groupon, you know, hype that it's
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coming out. It's going to be great. And then it's going to go away. I don't know. All I can tell you
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is parents, wherever you are. Okay. Parents talk to your kids. They're going off to college.
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They're 18 years old. They can apply to this stuff. It's horrible for them. Horrible. If you
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can't afford to buy it, do not buy it. Sometimes the most basic principles are making a comeback.
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Yeah. Look at this. This is Groupon. Look where Groupon was at at one point. What is that date,
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Rob? November, 2011. Oh, that's the date. I just said 11, 2012, November to the guys on the cover of
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Fortune Magazine, Forbes Magazine, everybody. He was offered for someone to buy his company for
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$6 billion. He turned it down. Google offered it and they wanted the consumer data. Google
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offered it to buy it $6 billion. What is the market cap of Groupon right there? Look at that.
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Go back to that article. Go back to that article. 10 years ago, Groupon turned down Google $6 billion
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offer. Here's what happened ever since. They have a nice little conference room now. Go a little
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bit lower, Rob. Go a little bit lower. What happened to them since? Zoom in. I think it's
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half a billion dollars right now, Pat. What is the market cap? The rejection came during
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heady times for Groupon, which launched in 08 with a 2-4-1 pizza deal at Chicago Bar quickly
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became Chicago's tech darling. By 2010, it had grown to 1,500 Chicago-area employees. Go a
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little bit low, Rob. I want to know what the market cap of Groupon is today. What is the market
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chart that you had up? What does it say, Mark? $654. $6 billion opportunity to $654. Rob, what is
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their revenue? Just type their revenue. What is Groupon's 2025 revenue is what I care about. I want
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to know actually what kind of numbers they're bringing in today. 2025 revenue. Can you do me a
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favor, also run a poll? Still not a bad revenue, by the way. Half a billion. It's not bad revenue.
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They're still pulling in a half a billion dollars. Can you do me a favor, Rob? Ask a question on,
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run this poll. Who still, who has used Groupon in the last 12 months? Ask the question in a poll,
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who has used Groupon? Has anybody here used Groupon last 12 months? Have you used Groupon? Mike,
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have you touched Groupon? You have. Where was it at? Massage partner used Groupon. Wow. Okay. Well,
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I guess that makes sense. By the way, this is brought to you by that massage partner. We're
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going to put the link to their website. I know my wife used to use it all the time,
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and I never hear her talking about it anymore. I know a lot of people used it. And I think what I,
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what I've heard is the retailers really found out that it wasn't really a way to get good long-term
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business. So they were selling all the lost leaders, but then they never recouped the
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difference of the lost leaders. The business owner, the business owner. So I think the appetite
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went down from the business owners. And I think that was a big drawdown on that. So it benefited
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the customer, but it didn't benefit the business owner. But even from the customer, they didn't
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really establish relationships with the retail establishment. So for example, they went to the
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massage parlor or whatever, they went to get the Botox, but they would just chase the best deal
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and they wouldn't actually develop a relationship with that provider. And so I don't think either party
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really benefited, it didn't turn into a long-term plan. But back to the BNPL, I think it will have
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staying power because people are always going to need to borrow money. That's my worry.
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The need to borrow money will always be, there's always going to be people who have money that want
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to loan it. And there's always going to be people that need to borrow it. I think you're right. I hate
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to say it, but I think you're right. But I think it's going to mess a lot of people up. For those of
00:16:47.940
you that run small businesses, this is one thing that most people are not aware of. We run a consulting firm,
00:16:54.020
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00:16:58.740
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00:17:14.800
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00:17:26.100
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00:17:30.900
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