A buggy edge case on a tiny borrowed amount does not equate a business model of a multi-million dollar corporation. I've borrowed a total of almost $10,000 thru Affirm over the years and never had problems.
I don’t really understand what financially competent person is using affirm. Generally when it comes to buying small nonessentials, if you can’t afford to pay for it now, the prevailing wisdom is don’t find a way to buy it, just do without.
I’m also curious to hear what the experience is like when you need to return something that was bought with affirm? Do they cancel the loan quickly? It appears their cs dept is under trained and doesn’t have the tools necessary to do a good job.
Not sure why the down votes. You can simultaneously dispute with the Attorney General office while paying Affirm's demands, in the hopes of later getting one of the payments refunded.
The claim in the linked article is that paying the demanded sum will harm the payor's prospects in a subsequent dispute, because the law assumes that any payment of a debt constitutes an admission on the part of the payor that the debt was legitimately owed.
This isn't the worst advice if he has the money to float it.
I recently had a non-renewal on my homeowner's insurance so I had to get new homeowner's insurance. Through a whole bunch of stuff, I wound up effectively sending three payments to two separate insurance companies. I had to float about $7000 - $8000 for a bit.
The insurance agent I had found seemed to be a bit inept, so I wasn't confident they had everything set up properly. Because when I called my mortgage company, they had no clue I was changing insurance companies. They had already submitted payment to the old insurance. I eventually found out how to pay the insurance on my own and just did that. And how to update my insurance information online. Then my escrow paid the new insurance company. So now I had three payments to two companies. And I had to pay into my escrow to cover the double payment. I was prepared to fight both of these companies to get them to cut checks back to me, but just as I was steeling myself for a day of talking to hapless customer service agents, the refund check from the wrong insurance came in. Then a week later, the refund check from the second payment to the correct insurance came in.
But yeah. I wanted to make sure I didn't have a lapse in coverage and then had to cover my escrow shortage. I technically could have waited for everything to sort out, but I didn't want to find out what would happen if things hadn't landed right.
Just FYI, but depending on your situation, you do not need to pay for homeowner's insurance (or real estate taxes) via escrow. You can handle it all yourself so you'll only have yourself to blame if the payments get screwed up.
Has anyone had luck with this route? I went through the process and was unsatisfied.
CFPB sends the complaint and then the company self reports that they didn't do anything wrong and then the complainer has a chance to say they disagree.
I don't think they intend to resolve specific issues. They seem more like a trendspotter than solutionist.
It's a circuitous path to the solution of get a lawyer. With CFPB, you are basically doing volunteer work for the government, which is fine and possibly noble, but not what you probably set out to accomplish.
Every time I have used it I have gotten a proper response from the company (one case was a clear mistake). But yeah if they don't, there isn't any immediate action from the CFPB. For a bank, you can complain to the actual regulator (OCC for a national bank, Federal Reserve or FDIC for a state bank).
A cfpb complaint got an issue resolved I had where my credit card issuing bank was refusing to accept that a charge was fraud. I issued the complaint with the exact same information I had given the bank support: that the supposed evidence that it wasn't fraud didn't include my signature and had an incorrect address, and as soon as the cfpb complaint came through the issue was resolved.
I had a major issue with Bank of America that I could not get any support on. I filed a CFPB complaint and was directly contacted by a representative the next day who solved my problem.
Complaints are a big deal for these banks and fintechs; if the complaint level gets high, the auditors show up and plant themselves in the office and start digging. And when they start digging, they find things... things that end in public fines and damaging press releases.
I don't have a comparison to other states or agencies. I have file 2 complaints to NY AG in my life and I got responds in about a week from the people I complained against. One was my very first landlord after college decades ago, the other was a tow truck company about 10 years ago.
That's nice that they cared, but they were under no obligation to respond. To me, this is an issue. We should have systems in place where people are guaranteed to have their issues remedied.
Mileage varies by state. The New York AG tends to make not responding very costly, sometimes debilitatingly so, for companies. A letter
copying e.g. the Alabama AG is likely to be ignored.
Do you have experience with the Alabama AG office not responding to a consumer complaint?
A quick google indicates both an online form and a phone number specifically for contacting Alabama AG Office Consumer Specialists: https://www.alabamaag.gov/consumercomplaint
> Do you have experience with the Alabama AG office not responding to a consumer complaint?
No, but it was a specific example cited by a prior corporate counsel. (We had an irate customer from New Jersey copy their AG. We were informed that Trenton is no Montgomery, the message being that if we didn’t promptly and properly respond their AG’s office would get involved.)
I live in Wyoming, by the way—our AG is likely also easy to contact but hard to get to follow up from. One of the trade-offs of living in a small-budget state.
> We should have systems in place where people are guaranteed to have their issues remedied.
That's basically what a lawsuit is--you sue someone and if they don't respond, you generally win by default, but if they do, you have the burden of proving your facts.
You don't just have to prove your facts. You also need to be acquainted with the current law and literally centuries of case-law. The burden is immense for an individual.
Another aspect of that is that if you opted out of arbitration is that small claims is a huge hassle for large companies. They will usually deal with you rather than fly some lawyer in.
If you didn't, well, arbitrators are paid by your opponent, and their decision score cards reflect that.
>>Filing a complaint is nice, but you’re basically at the mercy of the AG to care enough to do something.
Not in my experience in NY. Some decades ago in NY, I had a problem cancelling a gym membership within legally specified rights. Got nowhere. Sent a letter to the AG, and suddenly like magic, the clouds parted and the matter was resolved in my favor. MA AG is also very responsive.
The real scumbags often will not pay attention, but any biz that has the slightest interest in being around for the long term will definitely take notice when the AG starts to get involved. It is a hornet's nest you do not want kicked anywhere near you.
Yeah I certainly think that OP should have given up on customer service sooner and figured out a way to get through to the department of not-fobbing-people-off. This feels like that kind of complaint that, if it arrived in an appropriate format on the desk of some lawyer working for the company, would be quickly forwarded to the relevant department with some note saying ‘Please fix this and let me know when it’s done’.
Sounds like the only harm done to you is some unpleasant emails, and some phone calls that were also rather unpleasant that you initiated. Their automated systems and support seem rather terrible(unfortunately normal). You might have just sent these bad automated emails to your spam folder and been just fine.
Everything else is based on some imagined harm that might or might not come to you or some other imaginary person at some point in the future.
I used to get worked up about stuff like this but now I ignore it and my credit is pretty much perfect still. My mental state is much improved.
I might be not understanding the situation completely though.
> Everything else is based on some imagined harm that might or might not come to you or some other imaginary person at some point in the future.
They threatened to report this to a credit rating agency. At any given time it's probably not a big deal assuming 1) you don't need to replace your car or sign a lease or get a personal loan around that time and 2) you know that you can dispute negative marks on your credit report and you know how to do that.
I didn't know how to do that until I had my identity stolen and I'm definitely more credit savvy than most from my cc churning days
Disputing a negative hit to your credit score does not mean it gets removed. You need to have excellent documentation, which the author does but not everyone is so meticulous throughout a months-long dispute.
Also, credit scores are used now for some job applications. You can’t get some jobs without a good credit score. If you refuse to sign a waiver allowing the potential employer access to your credit score, you forfeit the job. Such jobs are often in the financial sector where employers want to make sure you do not have an incentive to steal.
> Disputing a negative hit to your credit score does not mean it gets removed.
I believe it usually does get removed immediately, but temporarily, until the credit reporting agency (CRA) has come to a decision on the case.
I've heard of folks closing on mortgages soon and out of nowhere, a past dispute winds up on their credit report as a negative item, putting the mortgage closing at risk. So they immediately dispute it to resolve the issue in the short-term.
> They threatened to report this to a credit rating agency. At any given time it's probably not a big deal assuming 1) you don't need to replace your car or sign a lease or get a personal loan around that time and 2) you know that you can dispute negative marks on your credit report and you know how to do that.
or 3) it's just a bluff
or 4) they do this all the time and the hit is so minimal that it won't even register, because of Affirm's disrepute.
This is so strange. If Affirm is the creditor why does he not ask Affirm to initiate a chargeback against the merchant? Is this one way Affirm can compete against credit cards, that they do not need to handle this kind of situation?
>personally I was always taught to go through your credit card/bank.
For direct merchant/service provider purchases. Different beast than an installment loan, legally speaking. Regardless of Affirm botching things after the loan was paid, I suspect that the party reversing and withholding payment on the loan was taking a contractually and legally indefensible position.
The way I'm reading it is that Affirm doesn't know how to handle chargebacks gracefully. Maybe the chargeback system doesn't allow Affirm to "pass along" the chargeback to the merchant?
I would always suggest trying to initiate a chargeback through the actual payment handler first - if they're unresponsive then I think it's perfectly reasonable to turn to your bank.
This write up looks like a great argument to just try and work through the system first.
The issue here, is Affirm is the paying bank. OP effectively opened a credit account with Affirm, and used that credit account to buy something. Then did a chargeback of his payment to the credit account, instead of having the credit account do the chargeback.
I've never understood the appeal of using a product like Affirm, especially if you already have a credit card.
Credit cards already give you a 30-day grace period before purchases start accruing interest. Using Affirm to extend that to 42 days seems inconsequential.
It seems like their target customer are people bad with credit, which would make them predatory.
I had poor credit from student loans and Affirm was very generous to me when other banks weren't. Affirm helped lay the foundations to rebuilding my credit. They've been good for at least my case
It's funny because giving people with poor credit loans they couldn't repay is exactly what led to the financial crisis and what we villainized the banks for.
This is only true in a vague and mostly irrelevant manner.
Yes - we gave people with poor credit mortgages to buy homes, and yes that did lead to the financial crisis, but not because they were poor and had bad credit.
It was because the loans were very large, and were backed by the supposed value of the home the person was buying. Then packaged in ways that hid the risk until the last minute - making those assets toxic when the housing bubble popped.
For small personal loans, there are not the same sort of systemic risks.
Odd. It’s on my most recent tri merge credit report a lender pulled (and provided me) for a recent RE refinance. Looks like they are selective about which loans they report? My purchase was ~$2k, with 12 monthly payments.
Asked and answered? Majority of Americans have credit cards. An awful lot still don’t, and have shit financial situations that make getting one pretty hard. This is a widely documented phenomenon.
Agreed about them being predatory. They literally lose money for every person that uses their service in the recommended/correct way, and only make money when someone flubs a payment.
That’s not how the business model works (or how they’d want it to work anyway). Affirm makes money on transactions in the “correct” way via very high merchant fees.
Merchants will pay affirm a large fee for conversion benefits (e.g better a customer pay $700 even if I lose $50 to affirm fees than for them to pay $0 because they got spooked by the price). Affirm gets the fee. They suffer risks from inflation and nonpayment. Hopefully for them one is larger than the other.
Ah, okay, fair enough then. I didn't realize merchants were paying affirm for this. Though I really hope the merchants look at their data. The only time I've used affirm is when I'm already on the checkout page, literally credit card in hand, where I would have bought the product no matter what. But yeah I'll take a 6 month 0% interest loan instead of a 1 month 0% interest loan.
There are many purchases I have made with Affirm to take advantage of pay-over-time without interest. In these arrangements I imagine the product is giving Affirm a cut.
Also for bigger purchases, it's better than a credit card. I pay my Amex balance off every month, but during the pandemic I used Affirm to purchase a home gym setup, and paid it over the course of 6 months at a much lower interest rate.
They are definitely not predatory in my view, but I don't have the perspective of a low-income person anymore.
Where will you put the money you’ve saved to beat inflation? When the market is good I’d say this Is a good plan but when the market is bad the only place that makes sense Is a HYSA
0% APR over 12 months for a big ticket purchase like a mattress in an inflationary environment and a bull market can easily equal an additional 5-7% discount on 2000 dollars.
Admittedly this is not how most people are using Affirm, but it's definitely been useful to me in that way.
Bingo. That's why I've done payment plans as well. Not because I couldn't just buy the thing, but because spreading the payments out over 12 months means more investment capital.
that's exactly why I do the free 0% for 1 year on big payment plans. Let me keep my money in my investments longer. Yes I do have the money, but I don't want to easily give it up. Paypal just introduced like a 'spread the payments out for 3 months' options with 0% interest. Its awesome stuff.
> because spreading the payments out over 12 months means more investment capital
This is essentially borrowing money to invest. It doesn't matter if the investment makes money or loses money the lender will expect payment. This strategy can make a lot of money, but it's also ruined many people. One key thing to watch while implementing this strategy is your debt to assets ratio. Also understand that during a market crash this ratio might change suddenly and dramatically.
I don't make small (sub $10k) purchases on credit, period. Not only is it somewhat risky but it also encourages overspending because it makes the 'pain' of spending money decrease. As for your $2000 mattress, I saved way more money by buying a $600 mattress instead and I sleep like a rock.
Sure, if you sink every penny into penny stocks or crypto you are definitely running a huge gamble. On the other hand, there are non-stock market investments that are perfectly safe. Go grab some TIPS/iBonds for the full amount of purchase. Or maybe go a little riskier and grab some bond index funds. Both of those options aren't playing the stock market.
If you wanted something a little more risky but not "throw it all on GME" then grab an ETF like VOO or VTI.
Obviously do what you like. I'm pretty comfortable with my ability to pay off my obligations.
Yeah, I don't know why more people don't see it this way.
Everyone seems to agree that you shouldn't eagerly make extra mortgage payments to pay off your home loan ASAP. Because you can pay it off over 30 years and presumably make more $$ investing than whatever paltry interest rate you had on your home loan.
But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?
> But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?
So what was their reasoning?
In the end it's all math, where some numbers are random variables with the corresponding variance. So this all depends on what rate you get, what returns you expect from the market, what's your risk tolerance, etc.
A second mortgage is extra risk to a person's most important asset which is typically reserved for funding a major home improvement project or for emergencies.
The "$2000 0% APR mattress loan" is useful because $167/ month is much easier to budget for and doesn't require a huge hit to savings.
One of these is just sane budging, the other is minmax gambling.
> A second mortgage is extra risk to a person's most important asset
Okay, fine, so that's the reason we don't like borrowing money to invest.
Now explain why it's good to have a mortgage at all? Don't just say "because a couple hundred a month is a small number". That's not a reason, it's just a single, incredibly subjective and situational factoid. Is there a logical or mathematical reason not to increase the amount of my mortgage as long as I can easily afford the monthly payment?
Yes, but then you aren't using it as a 12 month loan. You're using it as a one month loan. That is explicitly not what the person you're responding to is looking for.
This is also true in the US - but not at all what the parent comment meant.
If you pay the balance in full every month - you have spent $2000 on a $2000 mattress by the end of the month. This exposes you to ~30 days of inflation and you will have paid no interest.
If you pay 0% APR over a twelve month period, and make installment payments until making a single lump sum to close out the line of credit at the end of twelve months - you are exposed to something closer to ~365 days of inflation (depending on the installment payments and the lump sum). You will have also paid no interest.
If we assume roughly 7% yearly inflation, you're paying less real value if you take option number two, because you will have paid $2000, but that same mattress is now worth ~$2140 - You are abusing the time differential between purchase and payment to receive a discount.
That said - this is not the majority of folks using these services.
Ok - maybe it's more clear if I phrase it this way:
You paid 2022 dollars for a mattress priced in 2021 dollars. Because of inflation, 2022 dollars are worth less than 2021 dollars (each 2022 dollar is worth ~93% of a 2021 dollar, if we have ~7% inflation)
The mattress would have cost you $2000 2021 dollars if you paid for it immediately. But because you paid the 2021 price tag with 2022 dollars, you are receiving a discount: 2000 * .93 = $1860. You are only paying $1860 2021 dollars, vs the 2000 you would have paid.
Now - and this is very important - none of this matters if you're just shoving those dollars under your mattress for a year. You have to be taking advantage of the inflation by buying an asset that holds its real value over time, and then exchanging it back for the nominal value in 2022.
As an example - assume that we have ~7% inflation, and the total stock market is exactly flat: it neither gains nor loses value compared to inflation (its real value stays the same). You have exactly $2000, and the mattress costs exactly $2000.
Option 1: you pay right now. End result: you have 0 dollars.
Option 2: you pay one year from now, and invest the 2000 in the market until then. End result: after 1 year, when you sell you investments, you have 2140 dollars. you pay 2000 for the mattress. End result: you have 140 dollars.
That's the discount.
Now - the Corollary to this is that you have taken on risk. It's possible that the asset you buy won't hold real value compared to inflation. So while you stand to potentially make 140 bucks in a neutral situation, you also might end up losing money on the assets you buy, and not being able to pay the 2000 dollars.
At this moment in the US at least Bank of America, Discover, Chase, Citi & Capital One have publicly available offers for cards with 15 - 18 months of zero interest. All but the Chase (Slate) & Citi (Diamond) offer rewards of 1% back or better.
It is very common to get a credit limit in the range of $10-20k on these cards, one could easily put all expenses on a 0% interest card, make minimum payments and put the amount of the statement balance in a high yield savings account until the promotional interest ends.
In total one would get negative interest in the amount of the rewards (say 1.25% average) plus the 15+ month yield on the cash stored away.
That's basically what I do: put most purchases on a decent Chase rewards card, and pay the statement balance each month. I haven't paid a penny of credit card interest in many years.
Only if you have a source of post-inflation dollars, such as, your salary having been adjusted for inflation in the meantime, or you've sold inflated commodities recently at a post-inflation price, perhaps a used car that appreciated over the purchase term. If you are stuck with pre-inflation dollars this is no advantage.
You should not simply assume that you have access to more dollars just because inflation is rising. If your prices go up but your income does not, or your income significantly lags (anyone who got a pre-emptive inflation raise let me know, otherwise it always lags), you're paying for today's inflation with dollars from last year.
Yeah, the trick on taking out low interest loans is they have to be long term, like a mortgage. Over 30 years, I'm definitely paying it back in post-inflation dollars. In one year? Not really. I'd have to get a raise on, like, the day I took out the loan.
I can understand the value prop to the consumer - but I have a harder time understanding why it's an actual business, and why existing credit card companies or other lenders can't eat their lunch with the flip of a switch.
Hi! Affirms scores (evaluates the risk) of each transaction in real time, which allows then to have reasonably low bad rates. Very few lenders can do it.
I am curious why you think 'real-time' risk modelling in particular might be deficient? For the record I agree, but my issues are with fintech lenders desire to lend out money too freely (models that are designed to pump lending #'s, not repayment).
Banks have been saying that about online lenders for over decade now…and yet LendingClub, Upstart and SoFi loan books are still fine (and this three companies are taking 1/3 of all personal loan originations in the US)
We haven’t had a real recession in over 10 years, so that makes sense. Unless you count the very brief one back in mid 2020, which was mitigated by a flood of federal and state dollars, mortgage and student loan moratoriums, etc.
Why is this an advantage? The factors in assessing the risk are the creditworthiness of the customer and the amount. Also, I find it hard to believe that the creditworthiness of a customer actually fluctuates fast enough for Affirm to be able to do some arbitrage on it.
Affirm doesn't list their B2B pricing on their website, but credit cards typically charge up to 5% of the total purchase price in processing fees. It wouldn't be hard for a challenging upstart to make a solid business that just charges less. That's probably not the primary revenue driver for most BNPL companies though.
You've also seen credit card companies change their offerings to compete with the BNPL model. One of my credit cards has a "plan it" feature for large purchases, which allows you pay it of in a shorter period of time for a lower interest rate and without incurring interest charges on your month-to-month purchases.
Sure, 2-3% if you're WalMart. If you're (small respectable retailer) you'll be paying three times that and if you're a tiny retailer you'll be paying five times that.
Credit Cards are 2-4% + 0.1-0.3/transaction depending on your volume. Small businesses would pay the max on the flat and near it on the percentage.
Affirm and similar were 6% last time I talked to them (admittedly 3-4 years ago), and represented a far superior value proposition for a lot of customers because it gives them a longer period of time and forces them onto a payment schedule.
Makes sense for when I want to buy a Mattress or piece of equipment equally expensive over 12+ months with no interest. Except in cases where there is an equally good or better arrangement via one of my cards like 18-24 months no interest.
Even though I have the money, I've used this to leverage my liquid funds for side gigs. Although I have huge ethical issues with predatory companies like Affirm incentivizing people with less financial self-control to spend beyond their means. Honestly, I think companies like Chime are a bigger issue. They're the payday loan grift of today - especially with their advertising clearly targeting minorities that focuses on paycheck advances.
The appeal, as I understand it (and I'm 100% an out-of-his-field armchair analyst here), is that this is loan sharking with extra steps ("late fees") for those of us with the worse credit scores that can't get better options. I forgot the exact number, but when I've done the math how much maximum interest you accrue by missing every payment is well beyond usury, as I recall it gets you above 30% interests in 2-3 months (and caps there, which I guess is the silver lining), where as I've considered "interest" to be late fees over the loaned amount.
For every person using this to their advantage as a credit tool, I bet there are a dozen who are just sinking deeper into their debt quick sand.
IDK. My credit is great and anytime I'm offered 0% interest over 12-24 months for purchases $1k+ I take it. I much prefer having cash in hand. I don't buy very much stuff in general, but that's a different conversation.
Other commenters are offering very rational reasons including inflation and the time-value of money, but I think there's a much simpler explanation when it comes to most people: they see a smaller number, it's psychologically easier to pay less today.
> Credit cards already give you a 30-day grace period before purchases start accruing interest.
This depends on the timing of your transaction and your statement date. If you purchase something 1 day before your statement date, and you don't pay it off that same day, you will accrue interest.
Unlike those real-world counterparts, they don't make money. Also unlike the real-world ones, they're making loans so risky that they're apparently having issues selling even the highest-rated ABS tranches right now.
> Unlike those real-world counterparts, they don't make money.
What? How are they in business, then? Is this just the reverse side of "the market can stay irrational longer than you can stay solvent"? (I'd assumed they ended up being profitable off of people not paying things off in the 0% time)
I've never (in my experience) seen credit-poor customers get approved by Affirm (or any other BNPL).
I have, however, seen Affirm's other scummy side -- they have a special 'workflow' with a partnership with Katapult, a lease-to-own provider, where the merchant can take an Affirm denial and push it to Katapult for an even more predatory rent-to-own loan at higher rates.
I have rarely found anything that is capitalist and has a demographic interest in financially marginalized people ever to be ethical. When you match desperation with a lower possibility of solid education, "fiduciary responsibility to satisfy the investors" can never be capped. That goes same for the proverbial social business.
Can someone explain to me, i live in a country that doesn't have credit scores, limits loans rates to something sane, why you would use a predatory payment lender that will balloon? Seems like a very high risk gamble especially if you have the money and even higher gamble if you do not have the ability to pay a loan.
The lending industry in the US is very powerful and regularly lobbies congress to reign in consumer protection action from government agencies like the Consumer Financial Protection Bureau, which often issue guidance to limit the offerings of many types of consumer lenders.
The sad truth is that looking poor in the US is culturally frowned upon, which often drives people to overextend their credit in order to fit in. People are quite often encouraged through advertising to improve their status through consumption in the short term at the expense of the long term. It's heinous, but that's America for you.
For people who have the money and plan these 0% interest short/medium term loans can be a good deal. However, like this story shows you have to evaluate the reputation of the company because problems can happen. Personally if I were the author I would have just repaid the final payment, waited for the chargeback reversal to put me in a positive balance situation, then worked with Affirm to get a refund. That obviously assumes you have the cash to cover remaking the final payment but that’s just another part of risk mitigation when taking on debt.
Well the good news in America is that you'll probably have to declare bankruptcy over medical bills by the time the loan actually comes due so... problem solved!
I really agree though, buy now pay later seems like a huge fiscal trap. Employment is at will and you have no guarantee about what tomorrow holds so it's good to try and live within your budget whenever possible... this doesn't really go for housing and the like though since those costs are so astronomical you're going to be gambling with debt no matter how long you save first.
I used to find solace in the fact I could call a company and get to someone who can resolve my issue. These days I feel like it's impossible to get to a human, let alone one with any power, without jumping through hoops. It makes me hesitate to put trust into new products/services.
I had a couple cases where in one situation bank and another a business claimed I owed them and it would show up on my credit report. I didn’t pay either.
One point not brought up is that Chase may not be an honest broker here. I've seen both sides of a "charge back" that had the bank lying to both parties while soaking up a bunch of fees. Telling the customer that it had been resolved in the company's favor while telling the company that it had been resolved in the customer's favor. Taking both the funds and fees for themselves.
Affirm might well be correct that the bank has not really resolved the chargeback despite what Chase is telling him.
Chargebacks don’t work the way people think they work.
Under the hood raising a chargeback means your bank send the acquiring bank a message (with an exponent and evidence) that immediately reverts the original transaction and transfers money from the acquirer to the customers bank.
The merchant via the acquirer can then issue a message that does the opposite, again with an explanation and evidence. Eventually the card network steps in and makes a final decision, but they charge a significant fee to do this, strongly encouraging the parties to resolve the situation between themselves.
More importantly there is no “win” message or “give up” message. Instead there’s a set period of time each party is allowed to send a reversing message, after that time period the last person to send a message “wins”.
The periods of time involved are significant, ranging from 30 to 90 days depending on where in the process you are. As a result the bank could well say they’ve given up on the chargeback, and allowed the merchant to win. But the merchant can’t be sure of that until the countdown timer on a reversal has expired.
To make things even worse, most bank employees have no idea how payments actually work. They may well be looking at a tool that says they’ve “reversed” the chargeback. But under the hood that could just mean their system won’t send any further messages, allowing the other party to eventually win.
This is kind of OP's fault, right? I don't think it was appropriate to initiate a charge back on a payment to affirm since they provided their service to OP, that is they already paid for whatever OP was buying. I have a feeling that timing between OP opening the chargeback and the shipping of the item was actually coincidental.
I'd think if you paid affirm and the merchant hadn't shipped the item, then your recourse would be to go to Affirm, not your credit card you used to pay affirm.
Just to add to this, it sounds like OP didn't contact Affirm until after they already started the charge back. I definitely don't think it is appropriate to do a charge back before contacting the vendor that got the payment, which is Affirm.
I agree it does read like the OP triggered the entire issue with payments using a chargeback originating from Chase, regardless of the support/platform issues with Affirm.
I don't believe charging back the loan provider had any outcome to getting their product/service.
I have done a charge back against PayPal and I stand by it.
Basically, the vendor said it shipped me the product but never did. However, it gave PayPal a tracking number which was for something delivered to my town. I waited several months for the vendor to make things right.
I asked PayPal and the person said there is nothing it can do. I did a charge back and the bank gave me my money back.
So no, screw the vendors and screw the payment processors. I don't owe them anything. It is their responsibility to do things right or get a charge back.
OP could have initiated the chargeback through Affirm. I have used this process with Affirm before with much better luck. That being said, this does not excuse Affirms alleged poor customer service in this situation.
Affirm doesn't respond to emails and it's incredibly difficult to get anyone on the phone. So no, I don't think he could've charged back through affirm.
As I said, I have been through this exact situation with Affirm, and I did get my money back, so I know it is possible. I know others (the merchant I bought from went bankrupt) who did not get their money back- both who used Affirm and who used other mechanisms.
So I'm not saying whether or not OP would have gotten their money back had they went directly to Affirm- just that they should have given Affirm the chance. And none of this excuses Affirms allegedly bad customer service in this situation.
I used Affirm for a Casper mattress back in the day. Much the same scenario, it said "make X payments in Y months" and I was like "Ok".
I think that's Affirm's wheelhouse, providing smaller merchants of largish ticket items an easy way to do financing. So OP may not have had an option outside of Affirm to do the financing.
I'm not sure how much Affirm would care about the issue as they're pretty much a 3rd party to the entire situation. But, yeah, I think the order of operations here would be: call merchant, call Affirm, then call credit card.
I guess it would have been smart for OP to think of that purchase as an attempt to get that item from that merchant, and just to eat the $ rather than spend a lot of time and get their credit dinged. It isn't totally different from getting a physical mattress that may or may not work, especially since they eventually did ship the item. Actually, if the mattress caused back pain and I had to go through the trouble of disposing it, that would be worse than getting nothing.
We don't know if he bought a mattress or not. I did. Years ago. And the fact that people online don't like Casper is neither here nor there. It's fine. It's a mattress. It's better than a spring mattress.
I merely brought it up because I used Affirm to purchase it because that was the option given to me by Casper for their "pay in X in Y months" option.
I cannot say anything wrt this specific case but it definitely depends. Where I'm from you'd basically make 2 contracts: one purchase agreement and then another one for the money, which is basically just a credit you've gotta pay back.
So here you'd have to contact the seller, as the other party merely gave you a credit with hopefully good terms
> and they were unresponsive to my requests for a shipping date
There wasn’t an issue with Affirm not paying the money onward, why go to them.
Once again, Affirm have agreed to give credit to this company, that relationship is theirs. If their client isn’t fulfilling their duties it’s Affirms problem too.
Credit cards work like this, you pay your 2-4% fee and you’re guaranteed what you expected to receive.
Hence why airlines changing peoples tickets out for credit during the pandemic was easily routed around via a cc charge back.
I literally had the Turkish government change the law on my ticket to say the airline didn’t have to fly me but could swap my ticket for credit and I still made it away with my money in the end.
> If their client isn’t fulfilling their duties it’s Affirms problem too.
Again, they didn't even know there was a problem because the author never brought it to their attention before the chargeback.
The author borrowed money from Affirm and agreed to pay it back. He's in breach of his contract with Affirm, over a dispute with the merchant (a different party).
They make their money by acting as an integrated intermediary. They didn't borrow money separately and then use that money to buy an item. They borrowed as an integrated step in the purchase interface.
By acting as the intermediary they are the only party that received the posters money and ergo the only and appropriate party to claw the money back from. This is no different from buying a widget on amazon. Failing to receive the widget. Initiating a chargeback for the money.
Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Indeed its not really any different from a direct retail purchase where you buy a box and if you open the box and instead of nice new widget you find one that looks like it was mauled by a bear. Can you imagine going to the returns counter and being told despite paying us your money at our point of sale you need to fly to china and sue them if you want your money back. It's just not how the universe works.
They most likely actually CAN'T take money and deliver nothing and make it someone else's problem if they both want to do business in the US and keep doing business with credit card issuers here.
This isn't a good analogy. A retailer is responsible for giving you what you ordered (a nice new widget) because you are literally buying it from them. In this case, Affirm isn't fulfilling the purchase at all.
I think a better analogy would be you bought a house, but you find out later the seller lied about something (maybe they didn't install a new roof like they claimed), so you think the best course of action is to stop making mortgage payments to your bank.
> Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Yeah, after you request a refund from them. Try issuing a chargeback to Amazon next time you buy something from a 3rd party seller, I think you will have a bad time.
Sounds to me like Ryanair is on rocky footing with the law here. They refuse service, they issue a refund. Simple as that. They owe those people money. Unfortunate the courts didn't resolve it.
If that was the case, Turkish airlines had 4 more days to wait until we went to mediation with MasterCard. They could’ve proved their point and taken the money.
They didn’t, they backed out and handed the money back. 1600usd.
The concept that I still owe them money after they were unable to fulfill their duties is laughable, so much so, they wouldn’t even back themselves.
Edit, just to make it clear cc chargebacks aren’t some hit and run scheme
To get to the point I did. I had to
1 convince my bank I was right before they opened any dispute
2 defend myself against evidence the airline put forward saying they were right
3 wait 164 days for my money
And 1600usd vs never using Turkish airlines again… I’ll take the money.
Yikes, I can’t believe all the comments blaming OP. It was clearly the retailer in breach of Affirm’s terms, not OP. Charge backs also have a limited window to claim - I can’t see anything that was done wrong here by OP. Yes, OP could’ve attempted to resolve with affirm up front, but why should that be necessary?
> It was clearly the retailer in breach of Affirm’s terms
Yes, and that's why the payment to the retailer should have been the one in dispute, not the loan payment to Affirm. This is how it always works when you finance through a third party... it works the same way for a car loan, a mortgage, a credit card, etc.
How do you dispute a charge that took place between Affirm and the delinquent merchant? Affirm has your money. Affirms partner hasn't delivered on your merchandise. Affirm by being the one in possession of your money for which you have received nothing is the one in breach of your agreement and has no power to enforce terms for an agreement it has violated.
How do you charge back usually? You contact your credit card provider right? You don't just avoid paying your credit card... you contact the ones that credited you the money. In this case this is Affirm the creditor (I know you got 2 credits here, but that's a choice).
You got 2 contracts here, one to pay back a loan, an another with the merchant, and sadly, when you don't pay back a credit, it get on your credit report...
So the one to contact, is Affirm, just like the one to contact in case of issue with a payment you made, is your credit card provider, and not your bank.
Ok so this is what an affirm transaction looks like. You go to bobsite it says you can have a widget by paying now or if you click this radio button and select affirm there will be a only slightly different flow where you without leaving bobs site you agree to pay for it over time with the same payment card you have on file with bobsite for regular purchases. Click Complete purchase done.
Your money flows from you -> affirm -> merchant in a singular transaction that is actuated by several automatically scheduled payments at the appointed dates.
No transaction flowed between you -> merchant to charge back. Given that actually litigating a dispute in multiple states would be thousands of dollars your only actual options are let them keep all your money even if they are in effect defrauding you OR issue a chargeback to the party that collected your money and let THEM handle retrieving any money transferred from them to the merchant who ultimately didn't fulfill their duty.
You will note that due to the high cost of retrieving your money the merchant has absolutely no reason not to just keep your money and ignore your phone calls. They after all already have the money they were going to make off you. It cannot afford to not pick up the phone for Affirm because it intends to via its continuing relationship to continue making money.
Fundamentally every transaction you undertake is intermediated usually through a multitude of levels whoever actually takes your money be it affirm or walmart has no right to be paid if the goods aren't delivered and acquires in addition to your money the obligation of making the customer whole first and then seeking redress up the food chain.
This is only untrue when there are two distinct different not directly related transactions. Get a generic credit card and use it to buy a TV for example. It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
A situation whereby a singular purchase actuated by a button click is treated as 2 distinct transactions with virtually no recourse for any sort of misbehavior violates decades of consumer expectations and the ground rules under which we all presently do business. It is surprising and harmful.
> whoever actually takes your money be it affirm or walmart has no right to be paid if the goods aren't delivered
This is 100% not true for third party creditors, at least in the US. They do have a right to be paid, regardless of the services you purchased with that credit.
This and similar carveouts notwithstanding, any loan you take out, you are required repay, regardless of the experience with the seller.
You are correct that it is inconvenient when you obtain loans with poor conflict resolution processes. However, this does not negate your legal responsibility to pay those creditors. This is why laws like the FCBA were passed.
> It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
This might surprise you, but in the US, you are still legally required to pay your loans in both of those circumstances. This is the entire purpose of products like title insurance. The bottom line is that the bank is not culpable for other people's misdeeds.
In a circumstance where you spend $500,000 on a house that could not legally be sold to you, you would have to take the seller to court to recover that money so that you could pay back the loan. Or, more commonly, you'd contact your title insurance company for recovery, because your bank likely required that you bought title insurance for this exact reason.
There is no level of inconvenience that makes a bank legally liable for something that someone else did wrong.
> Charge backs also have a limited window to claim
That window generally starts counting down once the original transaction has completed in it’s entirety, which means you’ve received the goods (until you get the goods or services only one half of the transaction has completed).
If the merchant doesn’t deliver, then there is no limit on the chargeback period, assuming you’ve made a reasonable attempt to chase the merchant and got nowhere.
I don't view this situation as unique to Affirm in any way shape or form. I had a very similar situation with a chargeback scenario with my Apple card with fraudulent in-app purchases. The support infrastructure between bank - middleman - creditor is broken everywhere, and this is Apple and Goldman Sachs we are talking about.
But the developers got all their tickets closed this sprint. Because at the end of the day, ticking boxes is what matters, not actually providing business value. Just ask your scrum "master".
I find it hard to blame anybody but the company leadership for issues like this. They took on responsibility for the company, both its successes and failures.
There's a misconception that when you initiate a chargeback through your credit card, then you're good, you have your money and the merchant just has to eat it.
But the chargeback doesn't erase your debt with the merchant, so they are free to collect that debt by other means, including sending it to a debt collector.
Adding a third party like Affirm makes this messier - Affirm (presumably) fulfilled their service, they let you finance the debt and they paid the money to the merchant
I've had a scungy online only travel agent try to pull this on me before.
Their email to me saying they would be materially disadvantaged and blah blah blah got met with a response telling them to fuck off, stop emailing me and that I was reporting them to my bank for merchant fraud (which I did).
Problem solved. It's all fun and games until they risk losing their ability to process credit cards.
If you can prove that you don't owe the debt, then you're fine. But you can't just do a chargeback and assume that you no longer have to pay -- just because the credit card company took your side doesn't mean that you don't actually owe the money.
And not all chargebacks go through. Your bank or credit card company likely gives you a “provisional credit” while they investigate. The funds appear in your account but they can (and occasionally do) get pulled back if the financial institution determines, for whatever reason, the chargeback isn’t valid.
> tldr: I'll never use Affirm again because when there are issues with their payment system that could severely impact your credit score for years, their customer support is unequipped to help and their underlying support infrastructure is poorly designed.
The story of pretty much EVERY startup. What will it take to get these clowns to focus on customer service and properly build out infrastructure? How much is enough fintech recklessness?
> What will it take to get these clowns to focus on customer service and properly build out infrastructure?
Simple: Regulations with teeth.
There's a reason why this kind of service isn't popular in Europe - not just are us Europeans more averse to debt in general and our banking doesn't rely on paper checks (which eliminates payday loan services and other check-associated bullshit), but one of the core benefits that the EU provides to its citizens is consumer protection. The EU parliament doesn't have much else under its authority which is immediately visible to every consumer, so they put in an extra effort to make life in the EU easier.
As someone that never goes in debt and would never use Affirm, I still realize these types of services will impact me.
Just like with high cashback credit cards, they have large merchant comissions, that in the end have to be covered from the other customers to show only a single price.
I end up subsidizing other customers by a tiny amount, and just wish for regulation to stop this micro-theft.
There is a reasonable case made upthread that if you pay it off on time, 0% interest for a few months, especially with inflation, can be a good financial move.
I worked at a large OTA (Online Travel Agency) who adopted Affirm a few years back. I vehemently opposed it and told everyone I could up the chain of command. A vast majority of the folks who used it, are the ones who shouldn't use it. Taking out a two year loan for a 3 day vacation.
Why? It's actually extremely smart financially as stated in another thread where investing that money over 2 years can actually result in a slightly cheaper item.
The general thinking is something like ‘people who can’t pony up the cash right away are more likely to be in a more precarious situation and repeated use of BNPL services can lead to unmeetable obligations either because that person experiences a drop in income or because of many separate loans adding up.’ To some extent the argument feels like saying that poor people are stupid with managing money, which I think isn’t particularly true (though I also suspect there is some correlation in richer societies) but another way to phrase that is that it is much easier to live within your means if you have a lot of means. Certainly people do end up with debt they struggle to afford from schemes like this but it is hard to tell how big an effect it is from reading sob stories in newspapers.
People in the equity class are concerned with financing decisions to arbitrage rate of return spreads. Arbitrating spreads is a game of spreadsheets and math.
People in the poverty class are concerned with budgeting decisions to reduce their consumption as much as humanly tolerable. Reducing consumption is a game of psychological warfare between your future self and your present self.
The smart financial play is irrelevant to someone who needs to be making budgeting plays. Cheap credit leads to good financial decisions and bad budgeting decisions.
I have no idea what an Affirm is supposed to be; would people please include some context or otherwise try to be helpful when they post service complaints?
Yeah not much background in this article. Affirm is a "buy now, pay later" service (BNPL). It's basically just personal loans with the addition of a fee charged to merchants (on the premise that providing financing will attract more customers to the merchant). Very similar to the layaway offered by some merchants directly but Affirm offers this as a service.
Affirm is a unicorn and IPO'd in 20221. It has quite a few competitors in the BNPL space like Klarna and Afterpay. So far they all lose a lot of money.
Affirms big selling point, other than offering the checkout flow credit option which reduces bounce rates, is that they have "better" ways of determining if someone can be lended to. Even if a consumer can't qualify for a credit card, Affirm will still cut them a loan.
How true that second claim is and whether Affirm is merely yet another predatory lender, I will leave as an exercise to the reader.
Is it normal to do a chargeback against a loan provider? I was under the impression that it’s more for “services rendered” type of situations — which the lender fulfilled by providing the loan. I would expect there to be pure chaos if I did that to any of my lenders. I’ve just never heard of this sort of situation so I’m curious as to what the financial wisdom is.
I would think that the better thing -- in an ideal world -- would be to contact Affirm and tell them to withhold payment from the merchant, since the merchant had not provided the goods. That way you'd still be in Affirm's good graces.
But considering how this particular situation went as-is, I doubt Affirm would handle that request in any useful manner. Then again, I feel like this was a bit of an unusual situation that Affirm's customer service people were not well-equipped to handle (most people probably don't send chargebacks to Affirm), but perhaps Affirm does have a playbook for cases where a customer pays for something that isn't delivered.
So I'd agree that Affirm might not be the most appropriate target for a chargeback in this instance, but there might not be other options to get the merchant to send the goods. OP should have at least contacted Affirm before issuing the chargeback, though, since that's something of a nuclear option.
Affirm is not like a credit card. They actually put your loan with Cross River Bank and are just the middle-man who collects commissions and collects fees from merchants for advertising on Affirm.com/app. I learned this the hard way... they care not if you get the item, or if it is good, or if it is a scam. Affirm is oblivious to it all. Just collecting fees.
Same with any other loan product the bank doesn't care if it's a scam, only cares about collecting that glorious interest payment or fees associated. Plenty of people buy bad used cars with loans that span over years and that used car may fail months after purchase. Guess who doesn't care... the loan provider/bank.
Still the point is Affirm was the wrong target for their chargeback and the OP should have contacted Affirm to potentially resolve the merchant not delivering the goods or a refund of the loan.
Affirm makes money on both sides - interest from the customer, and a percentage of the transaction fee based inversely to the customer interest rate (e.g. you can do 0% interest but the retailer pays more per transaction).
Cross River might originate your loan, but AFAIK this is basically just a workaround for regulation on loan origination. Affirm just buys the loans back from Cross River once they have been funded, so they bear the credit risk.
(It sounds like it’s more complex than this, but I doubt Cross River has significant exposure to Affirm loans.)
One thing I'm curious about is whether Affirm would return the payment to you while they investigate the chargeback - that would be one reason as a consumer I would do a chargeback through my bank instead.
They're often very ill-equipped to deal with it and honestly it can hurt OR help you.
My car loan processor accidentally double charged my $5k loan payoff (and it didn't bounce). Customer support told me the only way to get back my money quickly would be to report fraud through my bank on the 2nd charge, which I did and the 2nd charge was returned within 2 business days. Then several weeks later I get snail-mail confirmation that my loan had been paid off and a certificate indicating this, along with a check for $5k from the lender. I called their customer support but they told me they are sorry but unfortunately since the account was already marked as paid out and those funds disbursed, I would "have" to keep it, so I gladly cashed the $5k check thereby getting my final $5k payoff of my vehicle for free thanks to the lender's mistakes.
This is like the mattress startup equivalent where if you try to return a mattress within their very generous trial period, you're often told to "keep it" and your purchase price is refunded.
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[ 0.14 ms ] story [ 298 ms ] threadI don’t really understand what financially competent person is using affirm. Generally when it comes to buying small nonessentials, if you can’t afford to pay for it now, the prevailing wisdom is don’t find a way to buy it, just do without.
I’m also curious to hear what the experience is like when you need to return something that was bought with affirm? Do they cancel the loan quickly? It appears their cs dept is under trained and doesn’t have the tools necessary to do a good job.
https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
I recently had a non-renewal on my homeowner's insurance so I had to get new homeowner's insurance. Through a whole bunch of stuff, I wound up effectively sending three payments to two separate insurance companies. I had to float about $7000 - $8000 for a bit.
The insurance agent I had found seemed to be a bit inept, so I wasn't confident they had everything set up properly. Because when I called my mortgage company, they had no clue I was changing insurance companies. They had already submitted payment to the old insurance. I eventually found out how to pay the insurance on my own and just did that. And how to update my insurance information online. Then my escrow paid the new insurance company. So now I had three payments to two companies. And I had to pay into my escrow to cover the double payment. I was prepared to fight both of these companies to get them to cut checks back to me, but just as I was steeling myself for a day of talking to hapless customer service agents, the refund check from the wrong insurance came in. Then a week later, the refund check from the second payment to the correct insurance came in.
But yeah. I wanted to make sure I didn't have a lapse in coverage and then had to cover my escrow shortage. I technically could have waited for everything to sort out, but I didn't want to find out what would happen if things hadn't landed right.
This is a right approach. I wish more people know about this.
https://www.consumerfinance.gov/complaint/
Complaints are a big deal for these banks and fintechs; if the complaint level gets high, the auditors show up and plant themselves in the office and start digging. And when they start digging, they find things... things that end in public fines and damaging press releases.
Mileage varies by state. The New York AG tends to make not responding very costly, sometimes debilitatingly so, for companies. A letter copying e.g. the Alabama AG is likely to be ignored.
A quick google indicates both an online form and a phone number specifically for contacting Alabama AG Office Consumer Specialists: https://www.alabamaag.gov/consumercomplaint
No, but it was a specific example cited by a prior corporate counsel. (We had an irate customer from New Jersey copy their AG. We were informed that Trenton is no Montgomery, the message being that if we didn’t promptly and properly respond their AG’s office would get involved.)
I live in Wyoming, by the way—our AG is likely also easy to contact but hard to get to follow up from. One of the trade-offs of living in a small-budget state.
That's basically what a lawsuit is--you sue someone and if they don't respond, you generally win by default, but if they do, you have the burden of proving your facts.
Another aspect of that is that if you opted out of arbitration is that small claims is a huge hassle for large companies. They will usually deal with you rather than fly some lawyer in.
If you didn't, well, arbitrators are paid by your opponent, and their decision score cards reflect that.
Systems exist and while they're not perfect you should at least try to use them before giving up and talking about how ineffective everything is.
Not in my experience in NY. Some decades ago in NY, I had a problem cancelling a gym membership within legally specified rights. Got nowhere. Sent a letter to the AG, and suddenly like magic, the clouds parted and the matter was resolved in my favor. MA AG is also very responsive.
The real scumbags often will not pay attention, but any biz that has the slightest interest in being around for the long term will definitely take notice when the AG starts to get involved. It is a hornet's nest you do not want kicked anywhere near you.
Everything else is based on some imagined harm that might or might not come to you or some other imaginary person at some point in the future.
I used to get worked up about stuff like this but now I ignore it and my credit is pretty much perfect still. My mental state is much improved.
I might be not understanding the situation completely though.
They threatened to report this to a credit rating agency. At any given time it's probably not a big deal assuming 1) you don't need to replace your car or sign a lease or get a personal loan around that time and 2) you know that you can dispute negative marks on your credit report and you know how to do that.
I didn't know how to do that until I had my identity stolen and I'm definitely more credit savvy than most from my cc churning days
Also, credit scores are used now for some job applications. You can’t get some jobs without a good credit score. If you refuse to sign a waiver allowing the potential employer access to your credit score, you forfeit the job. Such jobs are often in the financial sector where employers want to make sure you do not have an incentive to steal.
I believe it usually does get removed immediately, but temporarily, until the credit reporting agency (CRA) has come to a decision on the case.
I've heard of folks closing on mortgages soon and out of nowhere, a past dispute winds up on their credit report as a negative item, putting the mortgage closing at risk. So they immediately dispute it to resolve the issue in the short-term.
or 3) it's just a bluff or 4) they do this all the time and the hit is so minimal that it won't even register, because of Affirm's disrepute.
Also, after reading this account I would be very hesitant to go through Affirm for anything. Chase seems responsive on the other hand.
For direct merchant/service provider purchases. Different beast than an installment loan, legally speaking. Regardless of Affirm botching things after the loan was paid, I suspect that the party reversing and withholding payment on the loan was taking a contractually and legally indefensible position.
This write up looks like a great argument to just try and work through the system first.
Credit cards already give you a 30-day grace period before purchases start accruing interest. Using Affirm to extend that to 42 days seems inconsequential.
It seems like their target customer are people bad with credit, which would make them predatory.
Yes - we gave people with poor credit mortgages to buy homes, and yes that did lead to the financial crisis, but not because they were poor and had bad credit.
It was because the loans were very large, and were backed by the supposed value of the home the person was buying. Then packaged in ways that hid the risk until the last minute - making those assets toxic when the housing bubble popped.
For small personal loans, there are not the same sort of systemic risks.
Does Affirm report paid-off loans to credit agencies?
There's not a single Affirm tradeline on any of my credit reports.
https://helpcenter.affirm.com/s/article/reporting-to-credit-...
Asked and answered? Majority of Americans have credit cards. An awful lot still don’t, and have shit financial situations that make getting one pretty hard. This is a widely documented phenomenon.
Agreed about them being predatory. They literally lose money for every person that uses their service in the recommended/correct way, and only make money when someone flubs a payment.
Merchants will pay affirm a large fee for conversion benefits (e.g better a customer pay $700 even if I lose $50 to affirm fees than for them to pay $0 because they got spooked by the price). Affirm gets the fee. They suffer risks from inflation and nonpayment. Hopefully for them one is larger than the other.
Also for bigger purchases, it's better than a credit card. I pay my Amex balance off every month, but during the pandemic I used Affirm to purchase a home gym setup, and paid it over the course of 6 months at a much lower interest rate.
They are definitely not predatory in my view, but I don't have the perspective of a low-income person anymore.
Admittedly this is not how most people are using Affirm, but it's definitely been useful to me in that way.
This is essentially borrowing money to invest. It doesn't matter if the investment makes money or loses money the lender will expect payment. This strategy can make a lot of money, but it's also ruined many people. One key thing to watch while implementing this strategy is your debt to assets ratio. Also understand that during a market crash this ratio might change suddenly and dramatically.
I don't make small (sub $10k) purchases on credit, period. Not only is it somewhat risky but it also encourages overspending because it makes the 'pain' of spending money decrease. As for your $2000 mattress, I saved way more money by buying a $600 mattress instead and I sleep like a rock.
Sort of depends on the investments doesn't it?
Sure, if you sink every penny into penny stocks or crypto you are definitely running a huge gamble. On the other hand, there are non-stock market investments that are perfectly safe. Go grab some TIPS/iBonds for the full amount of purchase. Or maybe go a little riskier and grab some bond index funds. Both of those options aren't playing the stock market.
If you wanted something a little more risky but not "throw it all on GME" then grab an ETF like VOO or VTI.
Obviously do what you like. I'm pretty comfortable with my ability to pay off my obligations.
I would never tell anyone how to spend their money, I'm just bringing up a counter point to the conversation.
Yeah, I don't know why more people don't see it this way.
Everyone seems to agree that you shouldn't eagerly make extra mortgage payments to pay off your home loan ASAP. Because you can pay it off over 30 years and presumably make more $$ investing than whatever paltry interest rate you had on your home loan.
But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?
So what was their reasoning?
In the end it's all math, where some numbers are random variables with the corresponding variance. So this all depends on what rate you get, what returns you expect from the market, what's your risk tolerance, etc.
The "$2000 0% APR mattress loan" is useful because $167/ month is much easier to budget for and doesn't require a huge hit to savings.
One of these is just sane budging, the other is minmax gambling.
Okay, fine, so that's the reason we don't like borrowing money to invest.
Now explain why it's good to have a mortgage at all? Don't just say "because a couple hundred a month is a small number". That's not a reason, it's just a single, incredibly subjective and situational factoid. Is there a logical or mathematical reason not to increase the amount of my mortgage as long as I can easily afford the monthly payment?
A lot of people are probably getting used to that idea, and if/when the market turns its going to be messy.
If you pay the balance in full every month - you have spent $2000 on a $2000 mattress by the end of the month. This exposes you to ~30 days of inflation and you will have paid no interest.
If you pay 0% APR over a twelve month period, and make installment payments until making a single lump sum to close out the line of credit at the end of twelve months - you are exposed to something closer to ~365 days of inflation (depending on the installment payments and the lump sum). You will have also paid no interest.
If we assume roughly 7% yearly inflation, you're paying less real value if you take option number two, because you will have paid $2000, but that same mattress is now worth ~$2140 - You are abusing the time differential between purchase and payment to receive a discount.
That said - this is not the majority of folks using these services.
You paid 2022 dollars for a mattress priced in 2021 dollars. Because of inflation, 2022 dollars are worth less than 2021 dollars (each 2022 dollar is worth ~93% of a 2021 dollar, if we have ~7% inflation)
The mattress would have cost you $2000 2021 dollars if you paid for it immediately. But because you paid the 2021 price tag with 2022 dollars, you are receiving a discount: 2000 * .93 = $1860. You are only paying $1860 2021 dollars, vs the 2000 you would have paid.
Now - and this is very important - none of this matters if you're just shoving those dollars under your mattress for a year. You have to be taking advantage of the inflation by buying an asset that holds its real value over time, and then exchanging it back for the nominal value in 2022.
As an example - assume that we have ~7% inflation, and the total stock market is exactly flat: it neither gains nor loses value compared to inflation (its real value stays the same). You have exactly $2000, and the mattress costs exactly $2000.
Option 1: you pay right now. End result: you have 0 dollars.
Option 2: you pay one year from now, and invest the 2000 in the market until then. End result: after 1 year, when you sell you investments, you have 2140 dollars. you pay 2000 for the mattress. End result: you have 140 dollars.
That's the discount.
Now - the Corollary to this is that you have taken on risk. It's possible that the asset you buy won't hold real value compared to inflation. So while you stand to potentially make 140 bucks in a neutral situation, you also might end up losing money on the assets you buy, and not being able to pay the 2000 dollars.
Such is life.
It is very common to get a credit limit in the range of $10-20k on these cards, one could easily put all expenses on a 0% interest card, make minimum payments and put the amount of the statement balance in a high yield savings account until the promotional interest ends.
In total one would get negative interest in the amount of the rewards (say 1.25% average) plus the 15+ month yield on the cash stored away.
You should not simply assume that you have access to more dollars just because inflation is rising. If your prices go up but your income does not, or your income significantly lags (anyone who got a pre-emptive inflation raise let me know, otherwise it always lags), you're paying for today's inflation with dollars from last year.
https://bam.kalzumeus.com/archive/buy-now-pay-later/
Also discussion thread for aforementioned piece: https://news.ycombinator.com/item?id=29841940
You've also seen credit card companies change their offerings to compete with the BNPL model. One of my credit cards has a "plan it" feature for large purchases, which allows you pay it of in a shorter period of time for a lower interest rate and without incurring interest charges on your month-to-month purchases.
Source? I thought it’s 2 to 3%.
https://www.valuepenguin.com/credit-card-processing/intercha...
Affirm and similar were 6% last time I talked to them (admittedly 3-4 years ago), and represented a far superior value proposition for a lot of customers because it gives them a longer period of time and forces them onto a payment schedule.
Quoting on-demand loan pricing with clearer upfront payment amounts is more intuitive to consumers than “putting it on the credit card”.
Might as well just go with your bank itself, instead of adding another 3rd party merchant into the mix.
For every person using this to their advantage as a credit tool, I bet there are a dozen who are just sinking deeper into their debt quick sand.
This depends on the timing of your transaction and your statement date. If you purchase something 1 day before your statement date, and you don't pay it off that same day, you will accrue interest.
What? How are they in business, then? Is this just the reverse side of "the market can stay irrational longer than you can stay solvent"? (I'd assumed they ended up being profitable off of people not paying things off in the 0% time)
I have, however, seen Affirm's other scummy side -- they have a special 'workflow' with a partnership with Katapult, a lease-to-own provider, where the merchant can take an Affirm denial and push it to Katapult for an even more predatory rent-to-own loan at higher rates.
The sad truth is that looking poor in the US is culturally frowned upon, which often drives people to overextend their credit in order to fit in. People are quite often encouraged through advertising to improve their status through consumption in the short term at the expense of the long term. It's heinous, but that's America for you.
I really agree though, buy now pay later seems like a huge fiscal trap. Employment is at will and you have no guarantee about what tomorrow holds so it's good to try and live within your budget whenever possible... this doesn't really go for housing and the like though since those costs are so astronomical you're going to be gambling with debt no matter how long you save first.
I had a couple cases where in one situation bank and another a business claimed I owed them and it would show up on my credit report. I didn’t pay either.
North ever showed up.
Affirm might well be correct that the bank has not really resolved the chargeback despite what Chase is telling him.
Under the hood raising a chargeback means your bank send the acquiring bank a message (with an exponent and evidence) that immediately reverts the original transaction and transfers money from the acquirer to the customers bank.
The merchant via the acquirer can then issue a message that does the opposite, again with an explanation and evidence. Eventually the card network steps in and makes a final decision, but they charge a significant fee to do this, strongly encouraging the parties to resolve the situation between themselves.
More importantly there is no “win” message or “give up” message. Instead there’s a set period of time each party is allowed to send a reversing message, after that time period the last person to send a message “wins”.
The periods of time involved are significant, ranging from 30 to 90 days depending on where in the process you are. As a result the bank could well say they’ve given up on the chargeback, and allowed the merchant to win. But the merchant can’t be sure of that until the countdown timer on a reversal has expired.
To make things even worse, most bank employees have no idea how payments actually work. They may well be looking at a tool that says they’ve “reversed” the chargeback. But under the hood that could just mean their system won’t send any further messages, allowing the other party to eventually win.
I'd think if you paid affirm and the merchant hadn't shipped the item, then your recourse would be to go to Affirm, not your credit card you used to pay affirm.
I don't believe charging back the loan provider had any outcome to getting their product/service.
Affirm was the wrong target.
Basically, the vendor said it shipped me the product but never did. However, it gave PayPal a tracking number which was for something delivered to my town. I waited several months for the vendor to make things right.
I asked PayPal and the person said there is nothing it can do. I did a charge back and the bank gave me my money back.
So no, screw the vendors and screw the payment processors. I don't owe them anything. It is their responsibility to do things right or get a charge back.
That's PayPal's fault then. If they don't make things right, you're justified to hold them to account.
So I'm not saying whether or not OP would have gotten their money back had they went directly to Affirm- just that they should have given Affirm the chance. And none of this excuses Affirms allegedly bad customer service in this situation.
I think that's Affirm's wheelhouse, providing smaller merchants of largish ticket items an easy way to do financing. So OP may not have had an option outside of Affirm to do the financing.
I'm not sure how much Affirm would care about the issue as they're pretty much a 3rd party to the entire situation. But, yeah, I think the order of operations here would be: call merchant, call Affirm, then call credit card.
https://www.reddit.com/r/Mattress/comments/ejx6za/my_casper_...
I guess it would have been smart for OP to think of that purchase as an attempt to get that item from that merchant, and just to eat the $ rather than spend a lot of time and get their credit dinged. It isn't totally different from getting a physical mattress that may or may not work, especially since they eventually did ship the item. Actually, if the mattress caused back pain and I had to go through the trouble of disposing it, that would be worse than getting nothing.
We don't know if he bought a mattress or not. I did. Years ago. And the fact that people online don't like Casper is neither here nor there. It's fine. It's a mattress. It's better than a spring mattress.
I merely brought it up because I used Affirm to purchase it because that was the option given to me by Casper for their "pay in X in Y months" option.
Your arguement is that Affirm should be able to clip the ticket and hold no responsibility for their client fufilling their duties?
The charge back goes to who you paid for a service, if they need to pass it on, it's for them to do.
So here you'd have to contact the seller, as the other party merely gave you a credit with hopefully good terms
There wasn’t an issue with Affirm not paying the money onward, why go to them.
Once again, Affirm have agreed to give credit to this company, that relationship is theirs. If their client isn’t fulfilling their duties it’s Affirms problem too.
Credit cards work like this, you pay your 2-4% fee and you’re guaranteed what you expected to receive.
Hence why airlines changing peoples tickets out for credit during the pandemic was easily routed around via a cc charge back.
I literally had the Turkish government change the law on my ticket to say the airline didn’t have to fly me but could swap my ticket for credit and I still made it away with my money in the end.
Again, they didn't even know there was a problem because the author never brought it to their attention before the chargeback.
The author borrowed money from Affirm and agreed to pay it back. He's in breach of his contract with Affirm, over a dispute with the merchant (a different party).
By acting as the intermediary they are the only party that received the posters money and ergo the only and appropriate party to claw the money back from. This is no different from buying a widget on amazon. Failing to receive the widget. Initiating a chargeback for the money.
Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Indeed its not really any different from a direct retail purchase where you buy a box and if you open the box and instead of nice new widget you find one that looks like it was mauled by a bear. Can you imagine going to the returns counter and being told despite paying us your money at our point of sale you need to fly to china and sue them if you want your money back. It's just not how the universe works.
They most likely actually CAN'T take money and deliver nothing and make it someone else's problem if they both want to do business in the US and keep doing business with credit card issuers here.
I think a better analogy would be you bought a house, but you find out later the seller lied about something (maybe they didn't install a new roof like they claimed), so you think the best course of action is to stop making mortgage payments to your bank.
> Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Yeah, after you request a refund from them. Try issuing a chargeback to Amazon next time you buy something from a 3rd party seller, I think you will have a bad time.
You still owe them the money. The airline can stop you from boarding a future flight. Chargebacks are not magic debt elimination tools.
https://amp.theguardian.com/business/2021/oct/12/ryanair-ban...
They didn’t, they backed out and handed the money back. 1600usd.
The concept that I still owe them money after they were unable to fulfill their duties is laughable, so much so, they wouldn’t even back themselves.
Edit, just to make it clear cc chargebacks aren’t some hit and run scheme
To get to the point I did. I had to
1 convince my bank I was right before they opened any dispute
2 defend myself against evidence the airline put forward saying they were right
3 wait 164 days for my money
And 1600usd vs never using Turkish airlines again… I’ll take the money.
I think the loophole here is Affirm not being regulated like a CC. Then they'd be required to arbitrate the dispute between OP and the merchant.
Yes, and that's why the payment to the retailer should have been the one in dispute, not the loan payment to Affirm. This is how it always works when you finance through a third party... it works the same way for a car loan, a mortgage, a credit card, etc.
You got 2 contracts here, one to pay back a loan, an another with the merchant, and sadly, when you don't pay back a credit, it get on your credit report...
So the one to contact, is Affirm, just like the one to contact in case of issue with a payment you made, is your credit card provider, and not your bank.
Your money flows from you -> affirm -> merchant in a singular transaction that is actuated by several automatically scheduled payments at the appointed dates.
No transaction flowed between you -> merchant to charge back. Given that actually litigating a dispute in multiple states would be thousands of dollars your only actual options are let them keep all your money even if they are in effect defrauding you OR issue a chargeback to the party that collected your money and let THEM handle retrieving any money transferred from them to the merchant who ultimately didn't fulfill their duty.
You will note that due to the high cost of retrieving your money the merchant has absolutely no reason not to just keep your money and ignore your phone calls. They after all already have the money they were going to make off you. It cannot afford to not pick up the phone for Affirm because it intends to via its continuing relationship to continue making money.
Fundamentally every transaction you undertake is intermediated usually through a multitude of levels whoever actually takes your money be it affirm or walmart has no right to be paid if the goods aren't delivered and acquires in addition to your money the obligation of making the customer whole first and then seeking redress up the food chain.
This is only untrue when there are two distinct different not directly related transactions. Get a generic credit card and use it to buy a TV for example. It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
A situation whereby a singular purchase actuated by a button click is treated as 2 distinct transactions with virtually no recourse for any sort of misbehavior violates decades of consumer expectations and the ground rules under which we all presently do business. It is surprising and harmful.
This is 100% not true for third party creditors, at least in the US. They do have a right to be paid, regardless of the services you purchased with that credit.
The only reason that you can dispute your credit card transactions is because congress passed a law specifically requiring this process: https://www.ftc.gov/legal-library/browse/statutes/fair-credi...
This and similar carveouts notwithstanding, any loan you take out, you are required repay, regardless of the experience with the seller.
You are correct that it is inconvenient when you obtain loans with poor conflict resolution processes. However, this does not negate your legal responsibility to pay those creditors. This is why laws like the FCBA were passed.
> It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
This might surprise you, but in the US, you are still legally required to pay your loans in both of those circumstances. This is the entire purpose of products like title insurance. The bottom line is that the bank is not culpable for other people's misdeeds.
In a circumstance where you spend $500,000 on a house that could not legally be sold to you, you would have to take the seller to court to recover that money so that you could pay back the loan. Or, more commonly, you'd contact your title insurance company for recovery, because your bank likely required that you bought title insurance for this exact reason.
There is no level of inconvenience that makes a bank legally liable for something that someone else did wrong.
That window generally starts counting down once the original transaction has completed in it’s entirety, which means you’ve received the goods (until you get the goods or services only one half of the transaction has completed).
If the merchant doesn’t deliver, then there is no limit on the chargeback period, assuming you’ve made a reasonable attempt to chase the merchant and got nowhere.
But the chargeback doesn't erase your debt with the merchant, so they are free to collect that debt by other means, including sending it to a debt collector.
Adding a third party like Affirm makes this messier - Affirm (presumably) fulfilled their service, they let you finance the debt and they paid the money to the merchant
Their email to me saying they would be materially disadvantaged and blah blah blah got met with a response telling them to fuck off, stop emailing me and that I was reporting them to my bank for merchant fraud (which I did).
Problem solved. It's all fun and games until they risk losing their ability to process credit cards.
When a problem happens, it is "nobody's" fault. But your credit gets destroyed though.
The story of pretty much EVERY startup. What will it take to get these clowns to focus on customer service and properly build out infrastructure? How much is enough fintech recklessness?
Simple: Regulations with teeth.
There's a reason why this kind of service isn't popular in Europe - not just are us Europeans more averse to debt in general and our banking doesn't rely on paper checks (which eliminates payday loan services and other check-associated bullshit), but one of the core benefits that the EU provides to its citizens is consumer protection. The EU parliament doesn't have much else under its authority which is immediately visible to every consumer, so they put in an extra effort to make life in the EU easier.
Just like with high cashback credit cards, they have large merchant comissions, that in the end have to be covered from the other customers to show only a single price.
I end up subsidizing other customers by a tiny amount, and just wish for regulation to stop this micro-theft.
People in the poverty class are concerned with budgeting decisions to reduce their consumption as much as humanly tolerable. Reducing consumption is a game of psychological warfare between your future self and your present self.
The smart financial play is irrelevant to someone who needs to be making budgeting plays. Cheap credit leads to good financial decisions and bad budgeting decisions.
Affirm is a unicorn and IPO'd in 20221. It has quite a few competitors in the BNPL space like Klarna and Afterpay. So far they all lose a lot of money.
How true that second claim is and whether Affirm is merely yet another predatory lender, I will leave as an exercise to the reader.
Here's a good deep dive on the BNPL model from Bits About Money: https://bam.kalzumeus.com/archive/buy-now-pay-later/
But considering how this particular situation went as-is, I doubt Affirm would handle that request in any useful manner. Then again, I feel like this was a bit of an unusual situation that Affirm's customer service people were not well-equipped to handle (most people probably don't send chargebacks to Affirm), but perhaps Affirm does have a playbook for cases where a customer pays for something that isn't delivered.
So I'd agree that Affirm might not be the most appropriate target for a chargeback in this instance, but there might not be other options to get the merchant to send the goods. OP should have at least contacted Affirm before issuing the chargeback, though, since that's something of a nuclear option.
Still the point is Affirm was the wrong target for their chargeback and the OP should have contacted Affirm to potentially resolve the merchant not delivering the goods or a refund of the loan.
Merchant > Affirm > OP Bank
(It sounds like it’s more complex than this, but I doubt Cross River has significant exposure to Affirm loans.)
My car loan processor accidentally double charged my $5k loan payoff (and it didn't bounce). Customer support told me the only way to get back my money quickly would be to report fraud through my bank on the 2nd charge, which I did and the 2nd charge was returned within 2 business days. Then several weeks later I get snail-mail confirmation that my loan had been paid off and a certificate indicating this, along with a check for $5k from the lender. I called their customer support but they told me they are sorry but unfortunately since the account was already marked as paid out and those funds disbursed, I would "have" to keep it, so I gladly cashed the $5k check thereby getting my final $5k payoff of my vehicle for free thanks to the lender's mistakes.