Family debt
Besides being a student, Adeline describes herself as a model, voice-over actor and online entrepreneur. Unfortunately, she claims to have been the victim of at least two scams in the pursuits of these ventures.
She and her family traveled to New York for what she thought was a modeling audition but “turned out to be a scam,” she told Hammer. The agency instead asked her to spend over $5,000 for a photoshoot and other expenses.
In a separate venture, Adeline turned to dropshipping — a retail strategy to sell goods online without holding inventory. Unfortunately, she says that she was scammed here, too, when she signed up with a company that convinced her to “invest” $3,000 in USDT (a type of cryptocurrency) to hold as a deposit on the platform that she’s now unable to withdraw.
Online scams related to cryptocurrency are on the rise. Investment scams linked to crypto increased from $2.57 billion in 2022 to $3.96 billion in 2023 across the country, according to the FBI’s Internet Crime Complaint Center.
To make matters worse, Adeline’s $3,000 investment in this dropshipping pursuit was funded by $1,700 in loans from her mother, uncle and a family friend.
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BNPL debt
Adeline’s pursuit of success wasn’t just fueled by loans from friends and family. To pay for the flight to New York, among other locations in pursuit of her modeling and acting career, she used buy now, pay later (BNPL) platforms such as Uplift and Affirm.
One of these BNPL plans was for a $1,281 loan at a 29.99% interest rate. Another loan came with a 35.98% interest rate.
“You’re taking out 30% interest at 18!” Hammer exclaimed.
The BNPL industry has undergone significant growth in recent years. The volume of loans in terms of dollars between just five lenders jumped 1,092%, from $2 billion to $24.4 billion, between 2019 and 2021, according to a survey of U.S. lenders by the Consumer Financial Protection Bureau (CFPB). In May, the CFPB moved to classify BNPL lenders as credit card providers, which should give borrowers many of the same rights and protections that they enjoy with conventional credit cards.
But Adeline’s problems with BNPL loans goes beyond any need for regulation. She owes thousands of dollars in these types of loans and has limited, inconsistent income. In order to help her survive and thrive, Hammer modified her budget to shed unnecessary expenses and provided a target income for her to meet in order to pay off the debts and repay her family and friends in a timely manner.
Correction, Aug. 13, 2024: The volume growth among BNPL lenders from 2019 to 2021 accounts for five companies selected by the Consumer Finance Protection Bureau, not the entire industry.
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