Archive for 2023
After the CFPB spent 13 years trying to figure out how to implement a wide-reaching poorly-worded law, the ensuing 888-page handbook full of rules for small business lenders to follow so the government can measure disparities in commercial loan underwriting processes, may have all been for naught. Congress wants the rules gone.
The rules in question were mandated by Section 1071 of the Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) at a time when the bill’s drafters assumed that all business financing products were loans and all loans came from banks. The consequence has been endless rounds of debates, RFIs, hearings, committees, consultations, explainer guides, and lawsuits. Most recently there was a court-ordered injunction put in place to delay implementation of these rules.
Today, however, the House followed the Senate in voting to strike down the relevant rules. Though it was close in both chambers of Congress, Democrats did join Republicans in reaching this outcome. Nevertheless, reports say that Biden is expected to veto their resolution.
Curiously, the passed legislation disapproves the rules submitted by the CFPB, not the underlying section of the law that mandates they draft a set of rules. This is important because it’s not Section 1071 that they’ve voted to undo, but rather the final rules that the CFPB has issued as part of its obligation to Section 1071.
According to House republicans, “By overturning the final 1071 rule, Congress will force the CFPB to reengage small businesses and their lenders to create a rule that is better tailored to their concerns and less likely to reduce the availability of credit.”
This effectively means that Section 1071 itself is safe (unless a court rules it or the CFPB unconstitutional). If the President does not veto it the legislation would force the CFPB to go back to the drawing board on rules it took 13 years to come up with in the first place.
An e-mail purporting to come from Bluevine’s Partner Notifications account was sent out to about 300 of their resellers yesterday with a plainly stated notice that their Referral Marketing Agreements had been terminated.
A representative from Bluevine confirmed that these notices were legitimate, saying that “we refined our strategy and are moving away from the ISO/reseller model.”
This was followed by the statement that “We will continue to work with a set of select strategic partners to deliver loans to small businesses.”
Bluevine has been making moves as of late. The company relocated its headquarters to Jersey City, NJ earlier this year, launched an Accounts Payable solution in August, and began offering protection of up to $3 million for business banking customers in September.
Have you heard? Prominent industry insiders are expecting a huge turnout for deBanked CONNECT MIAMI taking place on January 11th in Miami Beach. The signature event, which this year features the FIRST EVER Broker Battle™, is drawing interest from the funder and broker community like never before. Other notable things to catch include the all-in-one broker info session called Broker Brilliance, a guest keynote from industry veteran David Goldin, technology showcases, and tons of networking! January 11th is right around the corner. See you there!
As part of the FCC’s initiative to “combat illegal text messages” the regulator intends to require that texters and callers obtain a consumer’s prior express written consent from a single seller at a time. Specifically, the FCC is acknowledging that lead generation sites or comparison shopping sites attempt to abide by the current rules by obtaining one layer of consent that they then creatively apply as counting toward all the numerous parties they have relationships with. It’s known as the “Lead Generator Loophole.”
“Lead-generated communications are a large percentage of unwanted calls and texts and often rely on flimsy claims of consent to bombard consumers with unwanted robocalls and robotexts,” the FCC said in its proposal. Their solution? One-to-one consent.
First, the one-to-one consent must come after a clear and conspicuous disclosure to the consenting consumer that they will get robotexts and/or robocalls from the seller. “Clear and conspicuous” means notice that would be apparent to a reasonable consumer. In addition, if compliance with the federal Electronic Signatures in Global and National Commerce Act (the E-Sign Act) is required for the consumer’s signature, then all the elements of ESign must be present.”
Second, we adopt our proposal that robotexts and robocalls that result from consumer consent obtained on comparison shopping websites must be logically and topically related to that website. Thus, for example, a consumer giving consent on a car loan comparison shopping website does not consent to get robotexts or robocalls about loan consolidation.
Fortunately, the FCC spells out an example of what might be acceptable as one-to-one consent for a lead generator.
For instance, the website may offer a consumer a check box list that allows the consumer to specifically choose each individual seller that they wish to hear from. Alternatively, the comparison shopping website may offer the consumer a clickthrough link to a specific business so that the business itself may gather express written consent from the consumer directly. Our rule does not prohibit comparison shopping websites from obtaining leads through valid consent and provides multiple opportunities for responsible comparison shopping websites to obtain leads for potential callers.”
According to the National Law Review, “It has not been adopted yet but it looks like it will be in December when voted upon. It looks like the rule will become effective in or around August of 2024.”
As the small business financing space contemplates competition from merchant-integrated platforms like Square, Shopify, and Intuit, one behemoth is taking over the franchises themselves. The company is Roark Capital, an Atlanta-based PE firm with $37B in assets under management, and they taste delicious.
Roark Capital already owns Arby’s, Auntie Anne’s, Baskin-Robbins, Buffalo Wild Wings, Carvel, Cinnabon, Carl’s Jr., Hardees, Culver’s, Dunkin Donuts, Jamba, McAlister’s, Moe’s Southwest Grill, Schlotzky’s, Seattle’s Best Coffee, Jimmy John’s, SONIC, Jim’n Nick’s Bar-B-Q, Miller’s Ale House, North Italia, Nothing Bundt Cakes, and the Cheesecake Factory. Three of those are among the top fast-food sandwich chains in America (Arby’s, Jimmy John’s, and McAlister’s Deli). Roark is also presently in the process of acquiring Subway, the leading company in that category by nationwide sales. The deal was announced in August.
But now the FTC is saying not so fast on the basis that it might create a monopoly. According to Politico, “the government is focused in part on whether the addition of Subway gives Roark too much control of a lucrative segment of the fast food industry.”
“We don’t need another private equity deal that could lead to higher food prices for consumers,” railed Senator Elizabeth Warren on social media. “The FTC is right to investigate whether the purchase of Subway by the same firm that owns Jimmy Johns and McAlister’s Deli creates a sandwich shop monopoly.”
While many comments on social media made fun of this regulatory effort, perhaps such consolidation is a wakeup call for the small business finance industry. Once upon a time the textbook definition of a non-bank funding merchant was a restaurant or QSR sandwich shop. Although the target customer has broadened considerably since then, it may be worth keeping in mind that a large diversified portfolio of QSR funding customers might not be so diversified at all. Behind the scenes, it may actually all be a single counterparty. A small business might not be so small. You could be dealing with Big Sandwich.
“To say that hiring is a difficult process is an understatement and I think that it’s a direct reflection of the labor market and the volatility in America’s labor market right now,” said Manny Yosipov, CEO at Advanced Recovery Group. Yosipov’s company does collections in the MCA and business lending space, where like many other industries, persistently low unemployment coupled with a workforce tuned into lifestyle accommodations has made the hiring environment challenging.
“You have quality talent now that want remote work and a lot of flexibility,” said Yosipov. “I think that it’s hardest for companies that have started pre-covid, survived covid, and are now trying to grow and scale in the post covid market.”
Daniel Hye, ISO Relations Manager at Zahav Asset Management, said that if remote work wasn’t in such high demand, the open positions would have likely been filled by now. Zahav is currently looking to fill an underwiting and collections role.
“We could have already had someone, but we really don’t want remote because it makes a huge difference with the way things work,” Hye said. “Especially in our industry, everything’s about speed. You want to walk over to the underwriter or you want to turn around to the underwriter and say, ‘Hey, this deal, the ISO just called me, can we get this done? Or this was a mistake? Can you do this?’ Once it’s remote it changes the whole dynamics of how everything works.”
“I mean, remote is very preferred by a lot of people,” said Carli Bova-Chezem, Director of Human Resources at Capital Gurus, “but it’s kind of funny I talked to so many people all the time and it really isn’t for everybody. I get handfuls of people that are like, ‘I’ve been remote for the last month but I really want that camaraderie of an office and I miss being around people.’”
Capital Gurus has used a variety of sources to recruit but they’re now using an end-to-end hiring system called Breezy. Bova-Chezem said that it’s increased their application rate while streamlining the process.
“There’s a plethora of places that these applicants are coming from,” said Bova-Chezem. “Up until I’d say about a month ago, it was primarily LinkedIn, which is obviously a great resource, but we’ve gotten a lot more outreach using this new system, which has been great.”
Hye of Zahav, meanwhile, says they’ve also tried a variety of systems but that it comes down to finding job applicants with proper experience. “I think the biggest issue is being able to find someone who fits the criteria and is happy to get involved,” Hye said.
It’s Thanksgiving again so you know what that means? Memes! This tradition (which we’ve kept up with as often as possible) started on deBanked in 2012. We hope you have a wonderful holiday and strong end-of-year.
And now, the memes:
See previous year memes:
Plus, don’t forget to register for deBanked CONNECT MIAMI taking place on January 11 in Miami Beach. This year’s event will feature the first ever Broker Battle!
Before the Broker Battle at deBanked CONNECT MIAMI, come join the Broker Brilliance session!
- Enjoy a preview of the official SBFA broker certification led by the Executive Director of the SBFA and a Partner of top law firm Hudson Cook, LLP.
- Learn about pending legislation and regulations that could impact your career forever.
- Find out what licenses are required for brokers and broker shops so that you stay compliant.
- Hear about the extraordinary opportunity that comes with joining the official Broker Council.
- Don’t just sell for today, make sure you’re set up for longevity!
BUT, in order to experience all of it you MUST be registered for deBanked CONNECT MIAMI. Join the industry on January 11th!