When eBay (NSDQ: EBAY) bought Bill Me Later last year, many suggested it would prove to be a bad decision. The company, which provides short-term loans to consumers to help them make online purchases, is particularly susceptible to credit conditions. In its latest 10K, eBay offers some detail about Bill Me Later that explains why there were—and continue to be—concerns about the wisdom of the deal. From the 10K:

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—“The nonpayment rate among Bill Me Later users may increase due to, among other things, worsening economic conditions. ...Consumers who miss payments on their loans often fail to repay them, and consumers who file for protection under the bankruptcy laws generally do not repay their loans.” Translation: Delinquency rates are almost sure to rise.

—“Bill Me Later is not a chartered financial institution, and relies on CIT Bank to extend credit to Bill Me Later customers…Any termination or interruption of CIT Bank’s services to us ... could materially and adversely affect our ability to offer the Bill Me Later service.” Translation: If CIT goes under or decides to get out of the short-term consumer loan business Bill Me Later will be in trouble. 

The company announced on its fourth-quarter 2008 earnings call that it had tightened its credit requirements after nonpayment rates among Bill Me Now users rose during the period.