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Private credit firms snapped up nearly 14 times as much consumer debt this year as in 2024, piling into riskier areas such as credit cards and buy now, pay later debt.
In 2025, private credit groups, including the likes of KKR, Blue Owl and Sixth Street, either purchased or struck so-called forward flow agreements to purchase $136bn of consumer loans, according to figures compiled by KBW analysts. That number compared with just $10bn in the previous year.
The rush of deals — such as KKR’s agreement to purchase a multibillion-dollar credit card portfolio from New Day, a private equity-backed company in Europe — raises concerns about underwriting standards and risk management by Wall Street firms that are quickly expanding their empires.
“These deals underscore an emerging trend where private capital is fuelling rapid growth in unsecured consumer lending, while regulated incumbents continue to move with caution,” the KBW analysts said.
Consumer debt, including credit cards and other types of personal loans, are typically unsecured with no recourse towards the borrower. BNPL remains a relatively new product whose resilience during an economic downturn has yet to be fully tested.
Affirm, the BNPL player set up by PayPal co-founder Max Levchin, has said that the deals it had struck with the likes of Sixth Street, as well as insurers Prudential and New York Life, to sell billions of dollars of current and future loans were a key plank of its growth plans.
“It is the case right now that the capital markets are extremely constructive for Affirm and for a lot of other names, too,” Michael Linford, chief operating officer at Affirm, recently told an investor conference.
The push into consumer debt is the latest example of private credit managers’ aggressive move into “asset-based finance”, which includes equipment and aircraft financings, auto loans and student debt, an area that firms see as offering slightly higher risk-adjusted returns than typical corporate loans backed only by operating cash flows.
Adam Josephson, a former analyst at KeyBanc Capital Markets who now writes for his personal blog, said the rush into consumer credit has come just as credit quality deteriorates in the US and as banks’ credit card lending declined — due in part to slower income growth and population growth.
Revolving credit balances at US banks grew quickly in the years after the Covid-19 pandemic, according to data compiled by the Philadelphia Federal Reserve, but have fallen slightly in 2025 to just above $1tn.
“There are no signs out there that piling into consumer debt at this point of the economic cycle would be advisable,” said Josephson, citing rising delinquencies in auto and student loans.
“Maybe [private credit firms] feel like they need to do it because they don’t have other options, but that doesn’t make it a good idea,” he added.
The perceived opportunity in household borrowing has even prompted the launch of specialist firms. Fidem Financial was founded by Bank of America veteran Sanji Gunawardena in 2018, as an investor focused only on consumer debt, creating what he calls the first “credit card asset manager”.
The company has since purchased $15bn of credit card receivables. Now in partnership with Blue Owl as well as a loyalty management platform that in part comes out of the remainder of the Sears department store, it has launched a new venture called Aress to help third-party consumer companies launch co-branded credit cards that otherwise would have turned to traditional banks.
Gunawardena told the Financial Times that the credit card business had traditionally boasted the highest returns on equity within a bank’s lending arms. JPMorgan’s credit card unit, for example, has delivered an annualised return on equity of 35 per cent in its most recent quarter.
However, capital charges were becoming onerous, particularly among “near prime” consumers, leaving an opening for private credit upstarts.
Gunawardena said credit cards should prove a more suitable asset class for private capital, citing households’ willingness to pay those debts relative to BNPL instalment loans. The latter, he said, were more one-off, transactional and geared towards riskier customers, including those whose credit ratings put them in the subprime category.
“Post-crisis rules have pushed many banks to pull back from co-brand partnerships and focus on their own cards, leaving brands with few strong options to launch or scale programmes,” Gunawardena said. “We see a clear gap where private capital can step in.”
