Private credit firms are increasingly backing consumer debt, with their holdings growing by $150 billion since 2019, reaching an estimated $350 billion in 2025. This trend has gained recent attention as some loans made to software companies by private credit firms have encountered difficulties. A significant portion of this growth involves private credit channeling funds to FinTech companies to generate more loans. For example, Blue Owl has committed substantial capital to FinTechs, including a $2 billion agreement to purchase consumer loans from Upstart and $5 billion to support SoFi's personal loan platform.
This shift is exemplified by Bilt, a rent rewards FinTech. After Wells Fargo ended its credit card lending partnership with Bilt, the company struggled to find another large bank. Bilt subsequently turned to private credit, securing funding arranged by Blue Owl Capital, Stone Point Capital, and Goldman Sachs in February. This deal involved around $1.2 billion in existing credit card balances and an agreement to finance hundreds of millions of dollars in future credit card balances Bilt customers will incur. This kind of arrangement, including "forward-flow arrangements" for yet-to-be-originated loans, is becoming more common.
While some private credit executives view consumer debt as less risky due to relatively low credit card delinquency rates, others are more cautious, especially regarding consumers without mortgages. Concerns include inflation, slowing wage growth, and a cooling job market, which could all impact consumers' ability to repay debts. The increase in private credit's involvement in consumer lending comes as overall revolving credit growth has slowed, suggesting consumers are cutting back on credit card usage despite their importance for daily spending.
This growth in private credit's influence has drawn the attention of policymakers. Federal Reserve Governor Michael Barr has warned that stress in the private credit sector could lead to a broader "psychological contagion" and a credit crunch. The Federal Reserve's May 2026 Financial Stability Report noted that private credit loans accounted for approximately $1.4 trillion of corporate debt by late 2025 and highlighted increasing redemption requests at semi-liquid private credit vehicles. The Financial Stability Board issued warnings in May 2026 regarding valuation opacity, concentrated exposures, and links with banks and insurers, urging better data and monitoring to prevent systemic risks.
Despite these regulatory concerns, private credit is seen by some as a crucial funding source for businesses. The Managed Funds Association (MFA) reported in June 2026 that private credit funds have lent nearly $560 billion to U.S. businesses since 2023. These loans have reportedly generated about $897 billion in economic activity and supported approximately 6.5 million jobs. Pensions, foundations, and endowments have allocated over $1.5 trillion to alternative investment vehicles, including those backing private lending, according to the MFA. Regulators are currently considering next steps to ensure stability, balancing the need for transparency with preserving the vitality of private markets.
