Beware of those piecemeal loans advertised on Instagram
We have already warned readers of smart new credit companies like Affirm, who want to replace credit cards with on-the-spot loans integrated directly into the online shopping pages. Despite all their talk about helping consumers, these companies are little more than friendly loan sharks, renamed to offer a “premium experience”, but still dangerous and even predatory. Now on Racked, Journalist Susie Cagle takes a look at Affirm, weighing the pros and cons and assessing the claims of its leaders and spokespersons.
On the bright side, according to Cagle, Affirm evaluates its loans transparently, does not compensate its interest, and does not charge hidden fees. CEO Max Levchin says he opposes the traditional lending model, which he says “is based on customer failure.”
But as Cagle points out, Affirm’s median interest rate of 19% is higher than the median credit card rate, and retailers are using the company to build, and then aggressively advertise, the buying model of. expensive products on credit. Despite all of Affirm’s talk about responsibility and helping consumers make better choices, their third most popular purchasing category is fashion. “Clothes are really the only criticism we get. Like, oh my God, you’re funding a pair of shoes, ”Chief of Staff Ryan Metcalf told Cagle. “We had this debate internally,” he says.
It seems clear which side has won this debate. What’s responsible for pushing sneaker loans to $ 300? “I just think they are trying to code it as if they are trying to serve the underserved,” Lauren Leimbach, executive director of the nonprofit Community Financial Resources, told Cagle. Cagle’s investigation follows a Twitter thread this summer based on an Instagram ad by Affirm:
Affirm seems to make the problem worse. As Cagle says, “Affirm isn’t just about meeting demand, it’s about creating demand, encouraging buyers to buy and spend more. Affirm claims an average 75% increase in order value from all of its merchant partners. “
One customer, online clothing retailer Betabrand, discovered that his Affirm customers had so much money and good credit. But even at its best, the service just makes it easy to add interest charges to a purchase. And by branding itself as a solution for clients with bad credit, Affirm appears to be striving to reach out to those poorer clients and become a smiling and transparent predatory lender.
Metcalf tells Cagle that the “credit score” is to “give you access to things you couldn’t afford in cash.” That doesn’t mean you can’t really afford it.
I spent my 20s maxing out my credit cards, taking out payday loans, and racking up over a thousand dollars in overdraft fees. And I don’t agree with Metcalf: if you can’t buy consumer goods in advance, you certainly can’t buy them on credit.
I don’t see how a product like Affirm could possibly have helped me recover from bad credit, and not just get more into debt. Making loans more transparent does not solve the whole problem. I didn’t get into debt just because the fees were hidden; I got into debt because I was given the option.
Affirm’s Loans could be the future of shopping | Withdrawn