When Nigel Morris tells you he’s worried about the economy, you listen. As industry observers know, Morris co-founded Capital One and pioneered lending to subprime borrowers, building an empire on understanding exactly how much financial stress the average American can handle. Now, as an early investor in Klarna and other buy-now-pay-later companies like Aplazo in Mexico, he’s watching something that makes him deeply uncomfortable. “To see that people are using [BNPL services] to buy something as basic and fundamental as groceries,” Morris told me on stage at Web Summit in Lisbon this week, “I think is a pretty clear indication that a lot of people are struggling.” The statistics back up his unease. Buy-now-pay-later services have exploded to 91.5 million users in the United States, according to the financial services firm Empower, with 25% using the services to finance their groceries as of earlier this year, according to survey data released in late October by lending marketplace Lending Tree. These aren’t discretionary purchases — the designer bags and latest Apple headphones that BNPL was marketed for originally. Borrowers aren’t paying it all back, either. According to Lending Tree, default rates are accelerating: 42% of BNPL users made at least one late payment in 2025, up from 39% in 2024 and 34% in 2023. This isn’t just a consumer finance story; it’s a canary in the coal mine for the entire venture-backed fintech ecosystem and beyond, echoing what preceded the 2008 mortgage crisis except for one thing: it’s largely invisible. Because most BNPL loans aren’t reported to credit bureaus, they create what regulators call “phantom debt.” That means other lenders can’t see when someone has taken out five different BNPL loans across multiple platforms. The credit system is flying blind. “In a world where, if I’m a buy-now-pay-later provider, and I’m not checking bureau data, I’m not feeding bureau data, I am oblivious to the fact that Nigel may have taken out 10 of these things in the last week,” Morris explained. “[That’s] absolutely true.” Techcrunch event San Francisco | October 13-15, 2026 Storm clouds on the horizon The numbers that are available are both ugly and dated. Consumer Financial Protection Bureau data published in January of this year — after the agency issued market monitoring orders to major BNPL providers including Affirm, Afterpay, and Klarna — showed that roughly 63% of borrowers originated multiple simultaneous loans at some point during the year, and 33% took out loans from multiple BNPL lenders. The data also revealed that in 2022, one-fifth of consumers with a credit record financed at least one purchase with a BNPL loan, up from 17.6% in 2021; about 20% of borrowers were heavy users originating more than one BNPL loan on average each month, an increase from 18% in 2021; and the average number of new loans originated per borrower increased from 8.5 to 9.5. The borrower profile is as concerning: as of 2022, nearly two-thirds had lower credit scores, with subprime or deep subprime applicants being approved 78% of the time. To be clear, BNPL isn’t yet a systemic threat. The total market is measured in hundreds of billions, not trillions. But the lack of visibility into this debt — combined with its concentration among already-stressed borrowers — is worth watching far more carefully. Indeed, given that the economy is worse now than three years ago for many subprime populations — particularly in auto lending — these numbers are likely a lot higher now. As for why BNPL data isn’t more recent, thank regulatory upheaval. Under the Biden administration, the CFPB tried to treat BNPL transactions like credit card purchases, bringing them under Truth in Lending Act protections. The Trump administration reversed course. In early May, the CFPB said it would not prioritize enforcement of that rule. Days later, CFPB acting director Russell T. Vought rescinded 67 interpretive rules, policy statements, and advisory opinions dating back to 2011, including the BNPL rule. The agency said the regulations provided “little benefit to consumers” and placed a “substantial burden” on regulated entities. (Translation: BNPL companies lobbied successfully.) In fact, soon after, the CFPB released a new report with a surprisingly different message. Focusing only on first-time borrowers, the agency said customers with subprime or no credit repaid their BNPL loans 98% of the time, and that there was no evidence that BNPL access causes debt stress. The discrepancy between this rosy picture and the 42% late payment rate reveals the data gap at the heart of the problem: we currently don’t have good visibility into what happens to borrowers over time, especially those juggling multiple BNPL accounts. The optimistic report looked at first-time users; the concerning data comes from the entire user base. The state of New York in May im