Private Credit’s Consumer Debt Holdings Jump $150 Billion Since 2019

Private credit outfits are reportedly turning to consumer debt for high-yield investments.

That’s according to a report Sunday (April 19) from The Wall Street Journal (WSJ), which cited the example of the rent rewards FinTech Bilt.

After Wells Fargo informed Bilt it would no longer serve as lender for its credit card, the company tried to find a new large bank to work with, without much luck. From there, Bilt turned to private credit, WSJ said.

Bilt in February reached an agreement to move around $1.2 billion of credit card balances with funding arranged by a group including Blue Owl Capital, Stone Point Capital and Goldman Sachs, sources familiar with the deal told WSJ.

The companies also agreed to finance hundreds of millions of dollars of credit card balances that Bilt customers will someday incur, the sources said. Reached for comment by PYMNTS, Bilt declined to comment on WSJ’s report.

The company did point PYMNTS to last year’s announcement that it was launching Bilt Card 2.0, in partnership with Cardless.

Private credit, WSJ report noted, has come into sharper focus of late as loans made to software companies run into trouble and investors pull their money. With the consumer debt space, WSJ added, private credit is fueling a range of companies, including FinTechs, to generate an increasing number of loans.

As covered here, Blue Owl has committed significant amounts of money to FinTechs, including a $2 billion agreement to purchase consumer loans from Upstart, and $5 billion to support SoFi’s personal loan platform.

The WSJ report also cited estimates from Jeffries showing that private credit funds held $350 billion of consumer loan balances last year, versus less than $200 billion in 2019.

This includes a mix of previously originated loans that lenders unload to private credit and, increasingly, “forward-flow arrangements,” which involve agreements to purchase loans that have yet to be originated.

The report said some private credit executives see consumer debt as less risky, citing the relatively low delinquency rates on credit cards. But some private credit companies remain skeptical, the report said, especially on consumers without mortgages. They point to inflation, slowing wage growth and a cooling job market, all of which can make it tougher for consumers to repay debts.

PYMNTS wrote earlier this month of a slowdown in the revolving credit space, following a period last year in which revolving balances grew more quickly than other types of borrowing. New Federal Reserve data suggests people are cutting back on their cards, even as they remain a key part of day-to-day spending.

This behavior is in keeping with PYMNTS Intelligence, which shows more than half of consumers using credit primarily for planned purchases, while also keeping access to credit as a fallback for unplanned expenses.