Senate banking Democrats see the specter of the 2008 financial crisis in emerging tech-based lending products that lack the consumer protections applied to traditional forms of credit, including buy-it-now and pay services. ulterior.

Sen. Mark Warner, D-Va., has warned that unregulated financial products have migrated from the commercial sector to the retail sector since the last crisis. The run-up to 2008 was characterized by the proliferation of asset-backed securities and debt-backed bonds, but now it’s the rise of consumer-focused fintech services, including buy now, pay more late and advanced paycheck products, he told a senate. hearing Tuesday.

“We are now seeing a migration into the unregulated part of the financial industry. A massive amount of new consumer products [have] come into this area,” Warner said. “Some of these things bring real benefits, but I think sometimes we focus almost exclusively on the benefits and not on some of the challenges. The truth is that I think there are reasons why we have regulated institutions financial and with this regulation, although there are burdens, there are also advantages.

Buy now, pay later products have grown in popularity during the pandemic as lockdowns have pushed consumers to go online. Spending on products increased 230% from January 2020 to September 2021, according to research commissioned by Buy Now provider, Pay Later Afterpay.

The service allows consumers to pay for a product, often purchased online, in a set number of installments over a pre-determined period of time, typically four installments over six to eight weeks. Consumers accrue charges and may be prevented from using the service if they fall behind. Providers make money from merchants, who pay a fee to offer the services to customers.