Senate Banking Democrats see the specter of the 2008 financial crisis in emerging technology-based lending products that lack the consumer protections applied to traditional forms of credit, including buy now, pay later services.
Sen. Mark Warner, D-Va., warned that unregulated financial products have migrated from the commercial to the retail sector since the last crisis. The lead-up to 2008 was characterized by the proliferation of asset-backed securities and collateralized debt obligations, but now it’s the rise of consumer-focused fintech services, including buy now, pay later and advanced paycheck products, he said at a Senate Banking hearing Tuesday.
“We’ve seen now a migration in the nonregulated part of the financial industry. A massive amount of new consumer products [have] come up in this area,” Warner said. “Some of these things bring real benefits, but I think we focus sometimes almost exclusively on the benefits and not on some of the challenges. The truth is I think there are reasons that we have regulated financial institutions and with that regulation while there are burdens, there are also some benefits.”
