Articles by deBanked Staff
Fintech and Transparency in Small Business Lending
July 13, 2022
“Increasing the flow of capital to American small businesses is one of this committee’s foundational goals,” said US Rep Dean Philips (D), chairman of the House Small Business Committee, on Wednesday. Phillips was presiding over a hearing on fintech and transparency in small business lending
Witnesses invited to testify on the subject included:
- Sean Salas, CEO, Camino Financial
- Joyce Klein, Senior Director, Aspen Institute
- Diane Patterson, Regional Director, Twin Cities Small Business Development Center
- John Griffin, Chair in Finance, McCombs School of Business, University of Texas
Both members of the Committee and the witnesses shared varying opinions on how to accomplish transparency. Although this is the not the first congressional hearing of its kind, the timing indicates that federal interest is piggy-backing off of similar conversations playing out in several state capitols. The hour-long video is below:
Fintech Lender Signals That Capital Markets Are Worried
July 11, 2022
Concern about the economy is real. Upstart, the publicly traded online consumer lending marketplace, is noticing such a shift that it felt compelled to publish a sneak peek of its Q2 earnings. And it’s not good.
“Inflation and recession fears have driven interest rates up and put banks and capital markets on cautious footing,” said Dave Girouard, co-founder and CEO of Upstart. Girouard followed that by saying that its marketplace is “funding constrained,” a challenge “largely driven by concerns about the macroeconomy among lenders and capital market participants.”
Originations in Q2 were down as a result.
Though the company is still optimistic that its risk models will perform, the economic headwinds come just as it was beginning to roll out its new small business lending product.
In May, Girouard said that their small business loan pricing model would include more than 500 variables about both the applicant and business.
“It will also feature our loan month modeling framework, which is one of the most impactful innovations added to our personal loan product a few years back,” Girouard said. “Our initial testing suggests that version 1 of our SMB model will deliver higher accuracy, as measured by Area Under the Curve, or AUC, than peer models that have been in the market for years.”
Upstart plans to publish its official Q2 earnings on August 8th. The price of its stock is down 93% since its all time high reached last October.
Virginia Disclosure Law Quietly Goes Into Effect
July 6, 2022
On July 1st, Virginia’s “sales-based financing” disclosure law quietly went into effect. The Delegate from Virginia that introduced it in the first place, Kathy Tran, marked the occasion by retweeting a caucus announcement that it was live. Elsewhere, it was hardly mentioned. It was even absent from the Official Code of Virginia where it was supposed to be ceremoniously entered on July 1st. The State insists that its omission is just a glitch.
“There have been significant technical difficulties during the 2022 code upload process,” reads a notice on the Virginia State Law Portal. “Due to these difficulties, the portal does not currently reflect the changes to enacted law. The Division of Legislative Automated Systems and the publisher are working diligently to resolve these issues as quickly as possible. Once the data is obtained from the publisher in the correct format, the standard quality check of the entire body of law that went into effect July 1 will be conducted.”
The law focuses primarily on disclosures. Sounds simple enough, but in the preceding weeks the draft disclosure form was met with some resistance by potentially covered parties because of how little time there was to integrate it into their systems and processes. Regardless, at least one small business funding company told deBanked off the record that ambiguous language and terms in the law had led to the decision to cease doing business in the State of Virginia, at least for now. Their focus is shifting toward compliance with the upcoming California and New York disclosure laws where the population pools are larger and the soon-to-be enacted requirements are seemingly more complex. Utah too will soon implement its own version of a disclosure law.
For commercial finance brokers, the defining elements of the Virginia law are that commissions earned will have to be disclosed to customers and that they’ll have to register their businesses with the State to even continue doing business there.
Early Bird Pricing for Broker Fair 2022 Ends Soon
June 30, 2022Early bird pricing to Broker Fair 2022, taking place this October 24th at the New York Marriott Marquis in Times Square, ends soon. This large annual commercial finance expo has already sold out the top level sponsorships. Among the premier names are National Funding, Lendini, and Rapid Finance as Platinum Sponsors and Balboa Capital, Fintap, ROK Financial, and Ocrolus as Gold Sponsors.
This event brings together brokers, lenders, funders, vendors, and more from around the small business finance industry. Attendees can expect education, inspiration, networking opportunities, and more.
US Chamber of Commerce Hints it is Prepared for Litigation Against the CFPB
June 29, 2022
The US Chamber of Commerce is not thrilled with the CFPB’s attempt to allegedly expand its power. A June 28 letter fired off by the Chamber to CFPB Director Rohit Chopra asks that the agency rescind amendments added to its Supervision and Examination Manual. Specifically, it wants the CFPB to limit its enforcement of anti-discrimination laws to the statutory boundaries established by congress. The CFPB recently announced, however, that it would start to enforce its own self-created anti-discrimination rules and policies above and beyond what is permitted by existing law.
“The Bureau’s self-expansion of its authority will impose significant burdens on banks, financial markets, and the consumers they serve,” the Chamber writes.
CFPB Director Chopra has garnered a bit of reputation for his views. He was previously a director of the FTC and rode into the top role of the CFPB through the Biden Administration. Chopra now finds himself in the crosshairs of the US Chamber of Commerce, the “world’s largest business organization.” With more than three million members, the Chamber warned that if the agency attempts to enforce its “unlawful” powers, that it is prepared to engage in litigation.
“Instead of perpetuating an improper exercise of authority, the Bureau should respect the limits of its authority and rescind these troubling amendments,” the Chamber’s Chief Counsel wrote on “Litigation Center” letterhead. “We encourage you to follow this course. The Chamber will not hesitate to take legal action to defend businesses (and the economy that they serve) against the Bureau’s unlawful actions.”
Two versions of the letter were sent. This is a link to one of them.
Time’s Almost Up: Are You Ready to Comply With the New Virginia Disclosure Law?
June 26, 2022Remember when Virginia passed a landmark sales-based financing law? Well, it’s supposed to go into effect on July 1st.
This is a draft of what the disclosure form is supposed to look like, though with only days left to begin compliance, it hasn’t even been 100% finalized.
Notably, funders will have to begin disclosing to merchants the amount of compensation being paid to the broker in connection with a deal. Also, by November 1st, funders and brokers will have to register their business with the State if they wish to continue working with Virginia-based businesses, a process that would include a background check and registration fees.
Please consult an attorney for official guidance on compliance.
NextPoint Financial Formally Announces End of LoanMe Business
June 23, 2022
Less than a week after word spread that LoanMe had stopped originating business loans, NextPoint Financial, LoanMe’s parent company, confirmed it in a formal announcement.
“Given current market conditions, the Company announces that LoanMe, Inc. (“LoanMe”), a subsidiary of the Company, will cease loan originations,” the statement read. “As a result, LoanMe has reduced its workforce and will continue to service outstanding loans that were previously originated. The Company decided to make these strategic changes to the business of LoanMe to better reflect the areas of focus and growth at NextPoint and to take into account existing market dynamics.”
The circumstances with LoanMe have apparently contributed to NextPoint’s failure to file its year-end 2021 and Q1 2022 financials, which are claimed to be forthcoming. NextPoint is publicly traded on the Toronto Stock Exchange. The sunsetting of LoanMe is oddly timed given that NextPoint only just acquired LoanMe last year and because LoanMe was one of its two primary business operations. NextPoint was a SPAC that also acquired Liberty Tax at the same time.
Although NextPoint cites “current market conditions,” a recent lawsuit filed by LoanMe against a loan servicer suggests that there may have been other issues at play as well.
Small Business Lending on Blockchain to be Discussed at NFT NYC
June 23, 2022Sean Murray is scheduled to speak at the NFT NYC Conference this afternoon about the use of NFTs in the small business lending market. NFT NYC is a 4-day event dedicated to the subject of non-fungible tokens. Blockchains present a possible solution to some inefficiencies that exist in the small business finance industry. Some or all of Murray’s presentation will be shared on deBanked.
Here’s a short preview of what’s going at NFT NYC:
