ArcaMax

Can you hear the canary in the economy's coal mine singing her heart out?

You know that we are headed for trouble when some masses start buying groceries on the installment plan. That is the business model behind the popular "Buy Now, Pay Later" (BNPL) borrowing platforms -- loans that spread out purchases into four payments.

Troubles are growing in several credit sectors -- in car loans, in credit card debt, in student loans. Inflation driven by monstrous federal deficits, plus a trade war, has already led to higher borrowing costs, which makes paying borrowed money back all that harder.

BNPL seems to be catnip for younger consumers who are digitally savvy and do a lot of buying online. BNPL shoppers spent about $19.2 billion in the first quarter of this year.

Modest wages play a part, but so does the allure of online shopping, which makes the purchase of fancy steak knives or luxury handbags feel so seamless. Over half of BNPL users responding to a Harris poll admitted that splitting payments let them spend more than they knew they should. Almost a quarter said their BNPL spending was "out of control" and that they couldn't afford most of what they bought without splitting payments.

BNPL lets people dig deeper into the debt hole, which "will be harder and harder to climb out of," Ed deHaan, an accounting professor at Stanford Graduate School of Business, told Bloomberg News. That happens more "easily when there's no transparency."

And there hasn't been transparency. This huge form of borrowing hadn't shown up in Americans' credit scores. The BNPL giants say they don't want to release that information because it could hurt credit scores needed to secure mortgages and other important loans.

Why didn't these borrowers use credit cards instead? The answer, in part, is that a third of them had already nearly maxed out on credit cards. BNPL traditionally attracts struggling low-wage earners and nowadays more middle-class customers.

FICO (Fair Isaac Corp.) is the company behind the most-used credit scores. It plans to roll out a new model that factors these BNPL loans into their calculations. Apple Inc. is the first big BNPL provider to give transaction and payment data to Experian, one of the big-three credit reporting agencies.

But things are getting tough all over in the consumer debt world. Credit card delinquency rates have recently reached the highest level since at least 2012. The number of auto loans that were at least 90 days late in the first quarter was up over 13% from the same period a year ago, according to the New York Fed. The thing is, many Americans can't get to work without their cars and trucks.

"When auto loan delinquencies are rising, it's a likely sign that people are struggling," LendingTree consumer finance analyst Matt Schulz told Fox News. "That's no great surprise, given stubborn inflation, high interest rates and general economic uncertainty."

Schulz adds that these numbers are especially worrisome because unemployment rates are still relatively low.

What about student debt? Nearly 25% of the $1.6 trillion in the federal student loan portfolio is at risk of default, according to Investopedia. TransUnion, another big credit-rating agency, reports that a record-high 31% of federal student loan borrowers are already 90 or more days past due.

It's hard to see the current leadership in Washington doing anything other than make the problem worse. Higher federal borrowing at higher interest is on track to make life in this country more expensive. (Moody's recently stripped the United States of its last triple-A credit rating.)

The Trump administration, meanwhile, is busy dismantling the Consumer Financial Protection Bureau. The CFPB put a lid on some predatory lending practices.

The canary is singing "A Hard Rain's A-Gonna Fall." The U.S. economy is looking shakier. No amount of bullying the Federal Reserve can change that.

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Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators webpage at www.creators.com.

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