Special Report: The Consumer Debt Iceberg

90 million Americans are projected to carry BNPL debt into 2026 that doesn't appear on credit reports.

48% of BNPL users are projected to pay late in 2026—up from 34% in 2024.

81% of Americans fear losing their jobs, with most taking no constructive action to replace their income.

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THE DATA GAP MASKING A POTENTIAL CONSUMER CRISIS

Bank of America reviewed credit card balances after Black Friday and said consumers are in good shape, but “Buy Now, Pay Later” (BNPL) debt doesn't show up on credit reports. And while more than 80% of American workers fear losing their jobs in the new year, their current employment keeps them off job reports. As early as January 2026, Sooth forecasts a potential domino effect, triggered by BNPL payments coming due, the gig economy slowing seasonally, and the fear of unemployment meeting financial reality.

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1. ANXIOUS WORKERS HIT A WALL

Four out of five US workers fear job loss, yet 77% haven't taken steps to protect their income—no job hunting, side gigs, or backup plans. As January’s BNPL payments near, with safety nets lacking and an uncertain year ahead, their anxiety sets off the start of a financial crisis.

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2. Q1 RETAIL STALLS

Consumers cut back on spending to cover BNPL payments. Fashion, beauty, and home décor —
categories where BNPL is often a default at checkout — see double-digit declines. 89% of
financially stressed consumers are seeking new credit card accounts, signaling a liquidity crisis
rather than a surge in consumer confidence.

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3. RETAIL RETURN TSUNAMI

Consumers don't just slow their buying — they try to back out of December spending. Retail
returns spike 28% as shoppers return holiday purchases to free up cash. Because BNPL providers
have already paid retailers in full, this debt lands on retailers' balance sheets. Q1 margins
compress. Earnings disappoint.

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4. THE CREDIT SCORING MODEL BEGINS TO BREAK

The damage extends beyond retail. In 2025, banks approved auto loans and mortgages based on
credit reports that omitted an entire debt class. Because BNPL providers like Klarna and Afterpay
do not report to credit bureaus, 61% of BNPL financing went to subprime borrowers who appeared
creditworthy on paper. Delayed delinquencies begin to appear on otherwise solid credit reports.

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5. BNPL TIGHTENS IN RESPONSE, FURTHER LIMITING CONSUMER BUYING POWER

Providers tighten to survive. Approvals drop. Down payments and tight credit limits become
requirements for many. Klarna IPO'd at $19.65 billion, but Q1 will be their toughest stress test to date.
With 41% of users already missing payments, BNPL losses continue to grow. The "four easy
payments" era becomes much less easy when collections begin.

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6. BRANDS GET ON BOARD WITH ENCOURAGING RESPONSIBLE CONSUMER SPENDING

Consumers remember who enabled the crisis and who helped them avoid it. The brands that offered
cost transparency and cooling-off periods gain market share. BNPL debt consolidation emerges as a
new financing category, with both traditional creditors and BNPL companies offering fixes for
strapped consumers.

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CONSIDERATIONS FOR Q1 2026

1. Q1 earnings guidance may not account for the return tsunami.

Retailers book holiday revenue in Q4. Returns hit in Q1. With BNPL providers already paid out, the cash
reversal lands on retail balance sheets — not lender balance sheets. Margin compression may surprise.

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2. Credit risk models not accounting for BNPL debt data remain incomplete.

Any loan approved in 2025 without visibility into BNPL obligations was approved blind. Auto, mortgage, and personal loan portfolios may carry exposure that won’t surface until delinquencies appear.

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3. BNPL provider performance is a leading indicator, not a lagging one.

Klarna, Affirm, and Afterpay delinquency rates and tightening approval standards signal consumer stress before it shows up in traditional credit metrics. Watch Q1 provider earnings closely.

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4. Consumer confidence surveys and actual consumer behavior are diverging.

Banks report healthy consumer credit, but Sooth data shows 89% of stressed consumers plan to open new lines in early 2026. Neither can be true, so fintech and finserv companies need to be wary of overextension.

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5. The brands that helped consumers overspend in 2025 may face 2026 reputational risk.

When the bill comes due, consumers will remember those who enabled it. Retailers heavily reliant on BNPL conversion may see loyalty erode as the “easy payments” narrative collapses.

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DATA SOURCES FOR THIS SPECIAL EDITION OF THE ELI REPORT

Insights are based on Sooth’s patent-pending methodology, which analyzes over 100 million intent signals from 220 million anonymized US adults to predict, with 91% accuracy, how their emotional, practical, and situational needs will influence their buying decisions and the subsequent impact on people, businesses, and the economy. In addition, the following sources were used for corroborating data and qualification of predictive insights:

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81% of workers fear job loss: MyPerfectResume "Great Stay" Survey, December 2024
61% of BNPL loans to subprime/deep subprime borrowers: CFPB "Consumer Use of Buy Now, Pay Later," January 2025
Returns spike 28% YoY: Salesforce Holiday Retail Report, January 2025
Klarna IPO valued at $19.65B: Klarna Investor Relations, 2025
Klarna losses up 17% YoY: Klarna Q1 2025 Financial Report
Klarna/Afterpay declined credit bureau reporting: Wall Street Journal, August 2025
"Phantom debt" terminology: Federal Reserve Bank of Richmond Economic Brief, January 2025
90M Americans projected to use BNPL: Juniper Research, 2025
48% projected late payment rate: ELI projection based on LendingTree trend (34% in 2024 → 41% in 2025)
41% of users already miss payments: LendingTree Survey, June 2025

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About Sooth & ELI

Sooth is the predictive intelligence company decoding the 93% of human decisions driven by emotional, practical, and situational needs. Powered by ELI — Sooth’s exclusive Emotional Logic Interface — Sooth uncovers hidden signals, turning audience behavior into predictive foresight. Sooth’s patent-pending methodology uses artificial intelligence to cross-reference more than 100 million intent signals with data on 300 million individuals worldwide to predict buyer tendencies with 91% predictive accuracy. For more information, visit soothbetold.com.

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