SEC urges rigor as private credit market expands
The SEC is tightening oversight on the $1.7 trillion private credit market, potentially impacting how consumer finance programs are funded and managed.
Curated by Financing Your Way from original reporting by American Banker — Top News. Summary is AI-assisted and editorially reviewed — see our editorial standards.
The SEC is putting private credit under the microscope, which could eventually change how your non-bank lending partners operate. Private credit has exploded into a $1.7 trillion market, increasingly providing the capital behind the consumer financing and lease-to-own programs you offer in-store. The SEC is now warning these firms to be much more transparent and rigorous about how they value their assets. For a retail operator, this means your lending partners may face stricter internal reporting requirements. If a lender uses private credit to fund their loans, they can no longer 'mark their own homework' when it comes to the value of their portfolio. The SEC is concerned that some firms might be overvaluing their assets to look more stable than they actually are. While this sounds like high-level finance, it hits home if your primary lender suddenly tightens their credit box or changes their terms because their own cost of capital has increased due to these new regulatory pressures. Stability in the private credit market is what keeps consumer financing flowing at the point of sale. If the SEC finds that these lenders are playing fast and loose with valuations, we could see a shakeout of smaller, less disciplined lenders. You should keep an eye on your financing partners' liquidity and backing as this oversight intensifies.
Source: American Banker — Top News
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