How Phantom Debt Is Haunting American Consumers

The number of buy now, pay later loans increased nearly 1,100% between 2019 and 2021, according to data compiled by the Consumer Financial Protection Bureau. The debt that accumulates from these loans is referred to as "phantom debt," because it's unclear just how much is out there and how well consumers are paying them back. Juniper Research estimates these transactions could reach nearly $700 billion by 2028. Watch the video above to learn more about the risk phantom debt poses to the economy.

Chapters:
0:00 Introduction
1:34 How much phantom debt is out there
5:00 Consequences of phantom debt
8:15 Regulating buy now, pay later

Produced by: Charlotte Morabito
Additional Reporting by: Jessica Dickler
Edited by: Nora Rappaport
Animation: Mallory Brangan, Christina Locopo
Supervising Producer: Lindsey Jacobson
Additional Footage: Getty Images

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How Phantom Debt Is Haunting American Consumers

[JacobPaula]

The U.S. economy relies on ongoing credit and debt generation for sustenance. The Federal Reserve is expected to increase the money supply, leading to further debt accumulation for the average American. Meanwhile, foreign nations continue to desire the U.S. dollar, despite their own economies facing significant challenges, some even worse than that of the U.S. This situation raises concerns about who will ultimately bear the consequences of these economic dynamics.

[CameronFussner]

Since Biden took office, there seem to have been more unfavorable results in America. I don’t know how but you’ve managed to package an unbiased analysis that is more entertaining than the sensationalized segment of economic and financial news. Thank you for your efforts to be the signal and not the noise. I understand that the economy is currently in a downturn and that we must wait for things to get better

[msoldate]

Finance people are pure artists of “How do we make money from people who don’t have money”

[kenmore]

Halloween must be coming. First I saw a thing about zombie mortgages this morning, now phantom debt.

[henryptung]

Why do I feel like this video is less about consumers complaining about BNPL, and more about banks/Wall Street complaining about others cutting into their exclusivity in the debt/transaction market and how they can't pressure more vulnerable people with worse loans (due to lower credit score)?

[OneManOnFire]

The biggest flex is owing $0 on all credit cards.

[zhpregistrynet]

All of sudden we care about debt? Nope... this is banks feeling left out since they want to be the ones giving the very same loan. .. oh the heartfelt narrative behind is so convincing.

[Vivienedouglass]

My dividend journey began when I realized that two particular expenses in my budget were always going to go up and never go down. The two expenses were taxes and insurance. I realized that the dramatic rise in both will need some added income. So, I started buying shares paying dividends. I can now see that this will be the path I need to take to make sure those two expenses will not overtake my future income.

[Aarrenrhonda]

I'm not sure how you've packaged an objective analysis that is more entertaining than the sensationalised section of economic and financial news, but since Biden took office, there seem to have been more negative outcomes in America. Thank you for your efforts to be the signal and not the noise. I realise that the economy is currently experiencing a downturn and that we must wait for things to improve.

[tm]

The title of this is misleading. The real title is phantom debt haunts banks and lenders because they are worried about not getting an accurate picture of household debt. Why do we as consumers care about that?

[novakaine]

I think this skirts the real problem... The fact that Americans need to take out a loan to buy necessities.

[tinsleyLuna]

My portfolio doesn’t just cater to dividend stocks. I hold $VFIAX (S&P 500 index fund) in my Roth IRA and $VTI (Total Stock Market ETF) in my taxable brokerage account. Two of my largest holdings. The individual dividend stock positions all complement the index holdings.

[kortyEdna]

Invest judiciously, keep a stop loss figure. Shuffle between debt and equity wherever the ratio goes too off your target. As for the target, I recommend a Ratio like this Debt % should be equal to your age in years. If you are 20, debt is 20%, reset in equity. If the market falls or rises drastically, your debt % will change, which you should rebalance to 20% and bring back equity to 80%. Thus you would have bought low or booked profit depending on if it was a crash or a bull run.

[MegaThucydides]

So, phantom debt = banks NEED to be able to track that debt through credit reports. Gotcha

[nicholass]

Summary: all of the experts in the video are upset that the credit reporting agencies don't have more of your personal information to sell to lenders . LOL

[frogboyxGaming]

The only reason this is an issue is because credit card issuers are losing that Sweet interest money.

[ericabrerav]

Sounds like traditional financial institutions are concerned with consumers not using credit cards to pay for products and then cash in on interest or late fees. People that are well off don't need to spread their payments over time, so the real money comes with people who cant clear their balance in full each month.

Also Credit Bureau's caring more about me paying off some random product that I purchased once vs my montly rent is silly 😂 Don't be fooled, this is more about protecting credit card companies than consumers.

[palillo]

I can tell this is a hit piece from the banks because they are losing a lot due to these pay now, pay later companies. They want the profits for themselves!

[jerryanyu]

This whole 'phantom debt' issue with BNPL is way overblown. The $2 trillion revolving debt from credit cards is a way bigger problem than something that's 1/1000th of the size. Affirm doesn’t even charge late fees, so there's no revolving debt problem like with credit cards. And seriously, if people couldn’t pay back, why are there so many BNPL companies making money, even without late fees?

[themacker]

Your researcher seems to have missed the fact that Layaway meant you didn't pick up the item until it was paid in full.