Articles by deBanked Staff
CircleBack Lending is No Longer Lending
October 14, 2016CircleBack Lending is no longer originating loans, Bloomberg reports. A Lending Club competitor, the company was an online lending darling, having secured a $500 million deal with Jefferies just two years ago. At that time, company CEO Michael Solomon said in an announcement, “we are taking a rigorous approach to credit underwriting and want to make sure we know our customers before issuing any loans.”
Along the way something must have gone wrong. According to Bloomberg, Solomon recently said that if the lender can’t raise money, it will transfer existing loans to another company to handle collections and payment.
Lending Club Increases Interest Rates
October 14, 2016Delinquencies are up among borrowers with “high indebtedness,” Lending Club said in a document filed with the SEC on Friday. As a result, they’re increasing interest rates by an average of 26 basis points with the bulk concentrated on F and G grade loans.
The announcement comes on the heels of a previous raise made six months ago and another made approximately six months before that. It is not uncommon for the company to make adjustments as trends change.
“Consumers appear to be taking on more debt overall due to low prevailing interest rates,” Lending Club states in their report, citing a Federal Reserve study that observed an increasing amount of indebtedness across student loans, mortgages, credit cards, auto loans, and other forms of credit as of the second quarter 2016.
They’re also tightening up their criteria in such a way that “approximately 1% of borrowers who previously would have been able to obtain a loan under prior underwriting criteria will no longer be approved.”
Morgan Stanley Backs Online Lender Affirm with $100 Million in Debt
October 13, 2016Consumer lending startup Affirm aims to replace credit card purchases with personal loans and has found a backer in Morgan Stanley.
Founded by former PayPal CTO and entrepreneur Max Levchin, Affirm secured a $100 million credit line from Morgan Stanley to expand its lending capacity. This latest round of financing totals the company’s fundraising to about $525 million in cash and debt financing with a $800 million valuation.
Affirm’s consumers are typically immigrants and recent college grads who do not own credit cards and have no credit history, who take out loans for big dollar online purchases like high end furniture, jewelry and gym equipment.
Affirm partners with ecommerce and internet service companies like Expedia, Casper Sleep and Eventbrite to offer personal loans (10-30 percent APR to be paid back within 12 months) to buyers at checkout.
The San Francisco-based company’s loans are funded by Cross River Bank and its investors include marquee Silicon Valley names like Lightspeed Ventures, Khosla Ventures and Andreesen Horowitz.
“The financial industry has managed to avoid significant disruptive innovation since the mid-90s, and we are working hard to change that. Our first goal is to bring simplicity, transparency, and fair pricing to consumer credit,” says Levchin on the company website. Is replacing credit card debt with personal loans a way to go about it?
UK Banks Will No Longer Be Allowed to Decline Small Businesses For Loans as Alt Lending Wins
October 10, 2016UK Banks better have a strong reason to turn down loan applicants, and if not, turn them over to another lender.
In an attempt to break the might of the big banks and back the thriving alternative finance industry, the UK Treasury will make it obligatory for banks to refer rejected small businesses to other lenders. Nine of the country’s largest banks including Royal Bank of Scotland, Lloyds, Barclays and HSBC will be legally obligated to do so when the plan goes into effect in the next three months, The Times reported.
The applicants will be referred to three loan marketplaces — Funding Options, Funding Xchange and Bizfitech that will make referral fees for loans funded on their platforms.
Online lending across the pond operates differently. The UK online alternative finance sector grew 84 percent in 2015, with support from the government and was one of the first countries to establish a regulatory framework where The Financial Conduct Authority (FCA) defines and categorizes crowdfunding, P2P lending and online lending. The UK is home to many early starters in the industry like Zopa and RateSetter.
Merchant Alleged To Have Forged Partner’s Signature On Merchant Loan Charged Criminally
October 9, 2016
It’s not a good idea to forge your partner’s signature, Troy Milbrath has learned, after being arrested on Thursday and charged with 16 felonies and three misdemeanors.
According to the Wisconsin State Journal, Milbrath, an owner of Mullen’s Dairy Bar & Eatery in Watertown, WI, took out loans and opened credit cards in his partner’s name and his partner’s wife’s name, in addition to taking out a merchant loan that his partner didn’t sign for.
His business partner, Todd Narkis, “found a business agreement with his name and Milbrath’s that allowed a financial company to take 35 percent of all credit card swipes at the business in order to pay off a loan,” the Wisconsin State Journal reports.
The business closed last month after the landlord refused to renew the lease. Just days before Milbrath’s arrest, he was reportedly looking to relocate. The business had been open since 1932.
The case number is 2016CF000392 in Jefferson County.
Brief: SMB Credit Rating Agency PayNet Releases Data Scoring for Alternative Lenders
October 7, 2016PayNet, an Illinois-based company that provides credit ratings to small businesses released a pooled-data score for alternative lenders to assess risk.
This new score builds on the existing PayNet MasterScore v2, which contains a total of over 587 variables. PayNet maintains a proprietary database of small business loans, leases and lines of credit worth over $1.4 trillion.
“Alternative loans are higher risk than traditional bank loans, but the nature of their risks is also different, as are a number of the warning signs of risk,” said Thomas Ware, PayNet’s senior vice president of analytics & product development, in a statement.
Brief: PE Giant Warburg Pincus to Acquire Texas Funder Ascentium Capital
October 6, 2016New York-based private equity firm Warburg Pincus agreed to acquire Texas-based equipment financing company Ascentium Capital. The details of the deal remain undisclosed.
Ascentium Capital, with $1.1 billion in assets provides vendor financing, partnering with distributors, resellers to fund their small business customers. And in March this year, it started lending to ISOs and retail merchants directly. The company will be continued to run by CEO Tom Depping who will roll over his stake in the business.
“We see a compelling market opportunity to continue to build Ascentium to become a multi-product capital provider to small businesses through both organic growth and complementary acquisitions,” said Arjun Thimmaya, Managing Director, Warburg Pincus in a statement.
The five year old firm has financed over $2 billion since inception, and funded $225.4 million during Q2 this year. Ascentium’s financial advisor was Goldman Sachs and Vinson & Elkins LLP served as legal counsel.
Debanked: Europe’s ING Bank, Commerzbank to Slash Jobs, Go Digital
October 3, 2016Europe is debanking.
Last week, two large European banks — ING and Commerzbank announced they are slashing jobs and spending the savings on digitizing its their businesses.
Amsterdam-based ING Bank will slash 7,000 jobs, around 3500 jobs in Belgium and another 2300 in the Netherlands. The savings ( around 900 million euros in five years) under the bank’s ‘Think Forward’ strategy, will be used to migrate to a single integrated banking platform in the Netherlands and Belgium. Separately, ING will also invest 800 million euros in digital initiatives over the next five years.
“Customers are increasingly digital and bank with us more and more through mobile devices. Their needs and expectations are the same, all over the world, and they expect us to adopt new technology as fast as companies in other sectors,” said CEO Ralph Hammers in a statement.
ING is not alone in marching towards technology; Germany-based Commerzbank also said that it will slash approximately 7,300 jobs over the next four years and spend 700 million euros annually on technology under its ‘Commerzbank 4.0’ strategy. Later this month, the bank plans to roll out ‘One,’ an integrated sales interface, enabling the bank’s sales staff and customers to interact and transact on the same platform and by 2020, it aims to have 80 percent of its relevant business processes digitized.
“It is inevitable that the various measures and intentions announced today may have a significant impact on many of our colleagues. It means some functions will change significantly in nature,” said Hammers.
The move from major banks is coming at a time when fintech is heating up — Europeans startups raised $348 million (£238.2 million) in the first quarter of the year, up from $337 million (£230.6 million) in the first three months of 2015. And with banks deciding to go lean, it could only open up the opportunity for more collaboration than competition among banks and startups.
