Fintech Lenders Spiral as Risky Borrowers Struggle

The end of an era of historically low interest rates has been a boon for big banks, which can now earn more from the loans they make. But for financial tech startups that sought to challenge traditional lenders, steeper borrowing costs have provoked a reckoning, forcing some to hike fees and cut off their riskiest customers.

Upstart, which focuses on personal and auto loans, reined in lending this year in part to avoid hitting regulatory caps on how much interest it can charge, a person familiar with the company said, as the company’s revenue plunged more than 50%. And Petal, a credit card startup geared toward customers with thin credit histories, is more aggressively applying late charges while saddling some customers with new fees. Jason Rosen, co-founder and CEO of Petal, has told staffers these moves were necessary for the card startup to survive, according to two former employees.