Private credit lenders could be overextended and for those who remember the 2007 real estate market crash, are well aware- risky lending- means trouble. Lone Star Professor and Economist, Hank Lewis, says the lack of transparency blocks the federal government oversight.
“The actual amount of money, the interest rates, the terms of these things- if they’re not known beyond the individuals that are in the contract, it could be potentially problematic.” Lewis said.
As one loan defaults, more loans are issued to cover the deficit- leading to a domino effect. He says defaulted contracts are pushing past 6 percent- when it was 3-4 percent a few years ago- becoming a matter of concern. “In the financial service realm, there are bad actors, and sometimes we don’t who the good and the bad actors are.” He said.
Lewis says limited government regulation could help. “So that people can get the information they need, they can choose and invest effectively, but not something that prevents the investments or makes it too difficult. We need a happy medium.” He said.