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Are “Buy Now, Pay Later” Retail Loans a Rip-Off?

20 points by imartin2k 5y ago

41209 5y ago
>One lender, Quadpay, posted a TikTok encouraging people to take out installment loans to pay for groceries, framing the advice as “the world’s biggest secret.” This made me mildly sick. At the same time, so many people are struggling it's no wonder a low interest loan to buy a sandwich is a popular business model. In a perfect world this type of thing would just be banned, but then arguably some people wouldn't eat
- gruez 5y ago
  >>framing the advice as “the world’s biggest secret.” >This made me mildly sick. It made me mildly sick too, so much so that I decided to check out the video. After watching it I can't say that their claim that it was being framed as "the world’s biggest secret" is accurate. The video just shows someone shopping, and pointing out you can use quadpay like a credit card.
  - DeltaCoast 5y ago
    I think OP is referring to the beginning of the video where the person shopping says "I'm going to let you in on the world's biggest secret". The audio unmutes weirdly so you may not have heard it. The video for reference - https://www.tiktok.com/@zip_usa/video/6943316833743211782 https://www.tiktok.com/@zip_usa/video/6943316833743211782
    - gruez 5y ago
      >The audio unmutes weirdly so you may not have heard it. Yeah that was it. Thanks for the correction.
- gowld 5y ago
  It's better to skip a meal now than take out a loan that makes you skip two meals later. If you can't afford to buy a sandwich, just buy the peanut butter for less and have plenty to eat. Also, survival food is cheap as dirt. No one starves due to food prices.
  - gruez 5y ago
    Not sure why this is getting downvoted. I suspect it's due to the last sentence, but getting 2000 calories of food for less than $2 is very doable: https://www.upstart.com/blog/lowest-cost-per-calorie-foods https://www.upstart.com/blog/lowest-cost-per-calorie-foods 2. White rice – $0.41 per 2,000 calories 7. Peanut butter – $1.25 per 2,000 calories 8. Whole milk – $1.37 per 2,000 calories 9. Pinto beans – $1.39 per 2,000 calories 13. Eggs – $1.61 per 2,000 calories Add in a few extra dollars for fruits/vegetables and you got a balanced meal for less than 1 hour of the federal minimum wage.
    - eurasiantiger 5y ago
      This doesn’t help those dependent on illicit substances, which tend to become a necessary coping mechanism once financial disenfranchisement becomes constant survival stress and days sort of start blurring together because of the PTSD symptoms. Have you ever HAD to survive on that kind of diet?
      - imtringued 5y ago
        You know eating until you are obese is a much cheaper coping mechanism than street drugs.
        netizen-936824 5y ago
        I would argue being obese is far worse for your health than most, if not all, "street drugs"
      - gruez 5y ago
        Sounds like the problem is "illicit substances" and/or "PTSD symptoms", not high food prices.
- BugsJustFindMe 5y ago
  You're misrepresenting the offer. Quadpay is not "low-interest". It's ZERO interest. There's a huge difference between a loan with interest and a loan without interest. Zero interest loans are good for everyone unless they spend more than they can pay back within the timeframe. It's exactly the same as using a credit card and paying the balance on time.
  - mike00632 5y ago
    Where is the business model if not to charge users a late fee or high interest when they can't pay it back? Yes, it seems like a credit card in that it's predatory and should be illegal. We're literally discussing taking out personal loans for food.
    - BugsJustFindMe 5y ago
      > Yes, it seems like a credit card in that it's predatory and should be illegal. Saying that credit cards should be illegal is laughable. Whether they're predatory could be debated, but there is zero downside to using credit cards if you pay off the monthly balance. > Where is the business model if not to charge users Well, the article says "the companies more often make their money from retailer commissions, not missed payments", so let's say that the business model is there.
    - nemothekid 5y ago
      >Where is the business model if not to charge users a late fee or high interest when they can't pay it back? Interchange fees. Most high limit card holders don't hold a balance (ex. the Amex Platinum/Gold/Green cards are charge cards that don't carry a balance). They make money by charging the retailing the .30c+2.9% fee on every transaction. This is why it's also makes sense to always use a credit card provided you pay it off - retails mark up everything to give credit card processors their "fee", but credit card companies give you kickbacks in the form of points. If you pay cash, you are subsidizing everyone else's credit card points.
      - ZeroGravitas 5y ago
anon_tor_12345 5y ago
is this the first instance of an article title that ends with a question mark where the answer is in fact yes?
- BugsJustFindMe 5y ago
  No, because the answer is actually "no". Half of the article is dedicated to zero-interest loans which are no different than using a credit card and paying the balance each month.
unanswered 5y ago
The only doubleplusungood thing being alleged about these BNPL scenes is that they are — checks notes — offering lines of credit. Shocking.
- gowld 5y ago
  Specifically, their advertised business model is convincing people who cannot afford to buy things to buy more things than they would otherwise buy. It's predatory by design.
  - unanswered 5y ago
    Yes, in the same way that credit card companies convince people to buy things they cannot afford, as well as mortgage companies, car financers, etc. Anyone enjoying these services but attacking BNPL is really attacking poor people: "those poors can't handle credit like I can!" And that ultimately comes down to enforcing class norms. "Poors", the thinking goes, "shouldn't be allowed to purchase middle-class things on credit because then what is the middle-class?"
menrris 5y ago
It depends, as many marketing schemes use these kinds of gimmicks to have a sale. They won't create some promotion if they are at a loss; everything they do will earn them a profit.
imtringued 5y ago
I don't think it is morally wrong but you have to remember that they are essentially a middleman and everyone knows middleman want their cut. The idea of boosting consumer spending through consumer debt is weird. You boost spending in the short term but over the long term you cut back on consumer spending. Because of fees you actually end up with less consumer spending overall than if you hadn't introduced debt.
- kyawzazaw 5y ago
  > You boost spending in the short term but over the long term you cut back on consumer spending. Because of fees you actually end up with less consumer spending overall than if you hadn't introduced debt. They are relying on the fact that customers will continue to spend because of the BNPL whereas they wouldn't have spent to buy if BNPL option doesn't exist.
BugsJustFindMe 5y ago
This article screams fabricated outrage. > Are “Buy Now, Pay Later” Retail Loans a Rip-Off? Uh, no? Not if the loan is interest-free! > A charming dinner plate costs $28 or “4 interest-free installments of $7.00 by Afterpay.” This is exactly like using a credit card and paying the previous month's balance on time. > Because of the ease of access to credit, the danger is that somebody who is borrowing may not be in the best position to borrow Yeah, so don't fucking do that. That doesn't make interest-free loans a rip-off.
mindslight 5y ago
Point of sale credit is merely another symptom - our society is sick with debt. All of our high ideals about self determination and free association rest on the assumption that individuals have the economic power to forgo suboptimal relationships, and our debt spiral is making this less true every year. The rise of overbearing debt corresponds to the information technology of tracking humans (eg "credit bureaus"). And when you think about it, this makes perfect sense as overbearing debt is essentially partial slavery. We look back at chattel slavery as some alien horror, but much of slavery was (and still is) "indentured servitude" whereby a worker would "borrow" the funds to obtain employment (eg ocean passage) and then slowly work off that debt as the master allowed (see also: company towns). Now an overarching record is kept by "credit bureaus", and they consider their titles over our lives so fundamental that they've created the term "identity theft" for when they've been defrauded, as if that should be our problem in some way. Where is this going? Older societies had periodic events where debts were wiped out. We've got bankruptcy, but that only works for the occasional individual who has personally overextended - it does nothing for the debt load on the whole society. I would have hoped with Covid slowdown that there would have been some repudiation of debt but rather the very first thing the government did was bail out debt-laden (ie looted) companies. Now they're working towards paying all the backed up residential rent debt at par rather than discounting it at all. Eventually something is going to have to break - eg low-means individuals figure out how to hide/shield assets and stop paying en masse, the dollar breaks as the government prints ever more of it to feed the debt black hole, society gets so bifurcated between the rich and the poor that there is a revolution, or who knows. Until something catastrophic happens, the screws will continue to tighten.

20 points by imartin2k 5y ago

>One lender, Quadpay, posted a TikTok encouraging people to take out installment loans to pay for groceries, framing the advice as “the world’s biggest secret.” This made me mildly sick. At the same time, so many people are struggling it's no wonder a low interest loan to buy a sandwich is a popular business model. In a perfect world this type of thing would just be banned, but then arguably some people wouldn't eat

gruez 5y ago
>>framing the advice as “the world’s biggest secret.” >This made me mildly sick. It made me mildly sick too, so much so that I decided to check out the video. After watching it I can't say that their claim that it was being framed as "the world’s biggest secret" is accurate. The video just shows someone shopping, and pointing out you can use quadpay like a credit card.
- DeltaCoast 5y ago
  I think OP is referring to the beginning of the video where the person shopping says "I'm going to let you in on the world's biggest secret". The audio unmutes weirdly so you may not have heard it. The video for reference - https://www.tiktok.com/@zip_usa/video/6943316833743211782 https://www.tiktok.com/@zip_usa/video/6943316833743211782
  - gruez 5y ago
    >The audio unmutes weirdly so you may not have heard it. Yeah that was it. Thanks for the correction.
gowld 5y ago
It's better to skip a meal now than take out a loan that makes you skip two meals later. If you can't afford to buy a sandwich, just buy the peanut butter for less and have plenty to eat. Also, survival food is cheap as dirt. No one starves due to food prices.
- gruez 5y ago
  Not sure why this is getting downvoted. I suspect it's due to the last sentence, but getting 2000 calories of food for less than $2 is very doable: https://www.upstart.com/blog/lowest-cost-per-calorie-foods https://www.upstart.com/blog/lowest-cost-per-calorie-foods 2. White rice – $0.41 per 2,000 calories 7. Peanut butter – $1.25 per 2,000 calories 8. Whole milk – $1.37 per 2,000 calories 9. Pinto beans – $1.39 per 2,000 calories 13. Eggs – $1.61 per 2,000 calories Add in a few extra dollars for fruits/vegetables and you got a balanced meal for less than 1 hour of the federal minimum wage.
  - eurasiantiger 5y ago
    This doesn’t help those dependent on illicit substances, which tend to become a necessary coping mechanism once financial disenfranchisement becomes constant survival stress and days sort of start blurring together because of the PTSD symptoms. Have you ever HAD to survive on that kind of diet?
    - imtringued 5y ago
      You know eating until you are obese is a much cheaper coping mechanism than street drugs.
      - netizen-936824 5y ago
        I would argue being obese is far worse for your health than most, if not all, "street drugs"
    - gruez 5y ago
      Sounds like the problem is "illicit substances" and/or "PTSD symptoms", not high food prices.
BugsJustFindMe 5y ago
You're misrepresenting the offer. Quadpay is not "low-interest". It's ZERO interest. There's a huge difference between a loan with interest and a loan without interest. Zero interest loans are good for everyone unless they spend more than they can pay back within the timeframe. It's exactly the same as using a credit card and paying the balance on time.
- mike00632 5y ago
  Where is the business model if not to charge users a late fee or high interest when they can't pay it back? Yes, it seems like a credit card in that it's predatory and should be illegal. We're literally discussing taking out personal loans for food.
  - BugsJustFindMe 5y ago
    > Yes, it seems like a credit card in that it's predatory and should be illegal. Saying that credit cards should be illegal is laughable. Whether they're predatory could be debated, but there is zero downside to using credit cards if you pay off the monthly balance. > Where is the business model if not to charge users Well, the article says "the companies more often make their money from retailer commissions, not missed payments", so let's say that the business model is there.
  - nemothekid 5y ago
    >Where is the business model if not to charge users a late fee or high interest when they can't pay it back? Interchange fees. Most high limit card holders don't hold a balance (ex. the Amex Platinum/Gold/Green cards are charge cards that don't carry a balance). They make money by charging the retailing the .30c+2.9% fee on every transaction. This is why it's also makes sense to always use a credit card provided you pay it off - retails mark up everything to give credit card processors their "fee", but credit card companies give you kickbacks in the form of points. If you pay cash, you are subsidizing everyone else's credit card points.
    - ZeroGravitas 5y ago

anon_tor_12345 5y ago

is this the first instance of an article title that ends with a question mark where the answer is in fact yes?

BugsJustFindMe 5y ago
No, because the answer is actually "no". Half of the article is dedicated to zero-interest loans which are no different than using a credit card and paying the balance each month.

unanswered 5y ago

The only doubleplusungood thing being alleged about these BNPL scenes is that they are — checks notes — offering lines of credit. Shocking.

gowld 5y ago
Specifically, their advertised business model is convincing people who cannot afford to buy things to buy more things than they would otherwise buy. It's predatory by design.
- unanswered 5y ago
  Yes, in the same way that credit card companies convince people to buy things they cannot afford, as well as mortgage companies, car financers, etc. Anyone enjoying these services but attacking BNPL is really attacking poor people: "those poors can't handle credit like I can!" And that ultimately comes down to enforcing class norms. "Poors", the thinking goes, "shouldn't be allowed to purchase middle-class things on credit because then what is the middle-class?"

menrris 5y ago

It depends, as many marketing schemes use these kinds of gimmicks to have a sale. They won't create some promotion if they are at a loss; everything they do will earn them a profit.

imtringued 5y ago

I don't think it is morally wrong but you have to remember that they are essentially a middleman and everyone knows middleman want their cut. The idea of boosting consumer spending through consumer debt is weird. You boost spending in the short term but over the long term you cut back on consumer spending. Because of fees you actually end up with less consumer spending overall than if you hadn't introduced debt.

kyawzazaw 5y ago
> You boost spending in the short term but over the long term you cut back on consumer spending. Because of fees you actually end up with less consumer spending overall than if you hadn't introduced debt. They are relying on the fact that customers will continue to spend because of the BNPL whereas they wouldn't have spent to buy if BNPL option doesn't exist.

BugsJustFindMe 5y ago

This article screams fabricated outrage. > Are “Buy Now, Pay Later” Retail Loans a Rip-Off? Uh, no? Not if the loan is interest-free! > A charming dinner plate costs $28 or “4 interest-free installments of $7.00 by Afterpay.” This is exactly like using a credit card and paying the previous month's balance on time. > Because of the ease of access to credit, the danger is that somebody who is borrowing may not be in the best position to borrow Yeah, so don't fucking do that. That doesn't make interest-free loans a rip-off.

mindslight 5y ago

Point of sale credit is merely another symptom - our society is sick with debt. All of our high ideals about self determination and free association rest on the assumption that individuals have the economic power to forgo suboptimal relationships, and our debt spiral is making this less true every year. The rise of overbearing debt corresponds to the information technology of tracking humans (eg "credit bureaus"). And when you think about it, this makes perfect sense as overbearing debt is essentially partial slavery. We look back at chattel slavery as some alien horror, but much of slavery was (and still is) "indentured servitude" whereby a worker would "borrow" the funds to obtain employment (eg ocean passage) and then slowly work off that debt as the master allowed (see also: company towns). Now an overarching record is kept by "credit bureaus", and they consider their titles over our lives so fundamental that they've created the term "identity theft" for when they've been defrauded, as if that should be our problem in some way. Where is this going? Older societies had periodic events where debts were wiped out. We've got bankruptcy, but that only works for the occasional individual who has personally overextended - it does nothing for the debt load on the whole society. I would have hoped with Covid slowdown that there would have been some repudiation of debt but rather the very first thing the government did was bail out debt-laden (ie looted) companies. Now they're working towards paying all the backed up residential rent debt at par rather than discounting it at all. Eventually something is going to have to break - eg low-means individuals figure out how to hide/shield assets and stop paying en masse, the dollar breaks as the government prints ever more of it to feed the debt black hole, society gets so bifurcated between the rich and the poor that there is a revolution, or who knows. Until something catastrophic happens, the screws will continue to tighten.