Articles by deBanked Staff
Business Loan Seekers Likely to Consider Numerous Options, Study Says
April 25, 2022
New data published in the annual FinTech Lending Study published by Smarter Loans revealed that 40% of business loan seekers compare more than six options.
Though this study focused on the Canadian market, it may partially explain a finding in the US, that more small business owners seeking capital are seeking out a merchant cash advance as a potential option than ever more. (A Federal Reserve study said that 10% of SMB capital seekers sought a merchant cash advance in 2021). That would make sense if business owners are obsessively applying to multiple sources for the sake of making more comparisons.
But even while they shop, they might not always be satisfied with what they learn, nor the outcome. Smarter Loans reported that only 60% of business loan seekers felt informed about their options while 40% of business owners that went forward with a business loan were not satisfied with their loan provider.
When examining both the business loan and consumer loan market, Smarter Loans says that loan seekers are more likely to receive their funds the same day they apply than ever before. (53% of those surveyed received funds within 24 hours of applying.)
Click here To view the full 2022 FinTech Lending Study published by Smarter Loans.
Posting Fake Reviews To Make Your Financial Services Company Look More Appealing? The CFPB Says You Will Face The Consequences
April 21, 2022
The CFPB has put companies that offer financial products and services on notice. If you post fake reviews about yourself online, it “may result in significant penalties.”
“Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal,” said CFPB Director Rohit Chopra. According to the agency, manipulating customer reviews is unlawful under the Consumer Financial Protection Act. “Laundering fake reviews in ways that appear completely independent from the company to improve their ratings may constitute a deceptive practice,” the agency states.
Examples were provided. One involved a company that relied on its own employees to leave reviews of the company’s products, which it said was unlawful because they had not disclosed that they were employees in the reviews themselves. Another example involved paying non-employees to post materially misleading reviews.
Also apparently illegal is only showing positive reviews about ones own products while hiding or refusing to publish the negative ones.
The CFPB cited a similar initiative undertaken by the FTC. “Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Advertisers will pay a price if they engage in these deceptive practices.”
With the CFPB’s purview being more narrow than the FTC’s, the CFPB’s closing message was that “Banks and financial companies should ensure that their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act. Violations are subject to civil penalties and other legal consequences.”
Man Who Defrauded MCA Companies Indicted
April 19, 2022
An alleged fraud executed five years ago against merchant cash advance companies did not go unnoticed. A grand jury indicted an El Dorado Hills resident named Suneet Singal on April 7th under seal. The Department of Justice announced it yesterday morning.
According to the Grand Jury, Singal engaged in a scheme to fraudulently induce financing companies to provide merchant cash advances to a company he had previously sold and no longer owned. In doing so, Singal allegedly received six wires from four financing companies between April 12 and May 22, 2017 in the amounts of $197,370, $112,308, $48,500, $294,946, $96,970, and $43,975. The indictment did not cite any of the companies by name. Allegedly, Singal used those funds for various expenses, and the company he did not own was forced to file for bankruptcy. Singal was indicted on 10 counts.
The DOJ did not publish the full indictment but it can viewed in its entirety here. Despite the “sealed” stamp at the top, the court ordered it be unsealed upon Singal’s arrest and is public record.
New Bill Would Give CFPB Regulatory Authority Over Small Business Lenders
April 1, 2022
When Congress passed a law in 2010 that gave the newly created Consumer Financial Protection Bureau a mandate to collect small business loan data, industry observers wondered just how broadly the agency would interpret that authority.
At least one Congresswoman, however, feels that the statute as written is limited. That’s because Rep. Nydia M. Velázquez introduced a bill on Friday that would explicitly give the CFPB the power it lacks to oversee small business lending altogether.
H.R. 7351, the Promoting Fair Lending to Small Businesses Act, is designed to give the CFPB supervisory authority of “nondepository persons offering or making small business loans.”
“This bill will play an important role in applying the same standards for all lenders who make loans for small businesses, and especially those that have been historically underserved by lenders such as minority- and women-owned businesses,” said Velázquez.
It would be no surprise if a small business lender had not been previously aware of the CFPB’s pre-existing data-collection powers. That’s because the law that was passed twelve years ago, still has not been completely rolled out.
Utah Passes Commercial Financing Disclosure Law
March 28, 2022
The Governor of Utah signed SB183 last Thursday, a law that will require commercial financing providers to formally register with the State as well as provide uniform disclosures on the transactions they conduct.
Beginning January 1, 2023, covered parties will require State approval to conduct business with Utah customers. Following that, the disclosures listed below will be required in the contracts:
- Total amount of funds provided to the business
- Total amount of funds disbursed
- The total amount to be paid
- The total dollar cost of the transaction
- The manner, amount, and frequency of each payment OR the estimated amount of the initial payment
- A statement of costs or discounts associated with prepayment
- The broker’s commission amount
- Explanation of payment methodology and hypothetical circumstances that could cause it to vary
The full text can be read here. deBanked first reported on this bill on February 9th.
Utah follows Virginia, New York, and California who have all passed their own versions of a commercial financing disclosure law. Maryland is the most likely state to pass one next.
Update on Connecticut Commercial Financing Disclosure Bill
March 28, 2022The Connecticut commercial financing disclosure bill first reported by deBanked on March 3rd is still in play. SB272, written similarly to the first draft of the recently passed New York legislation, has been met with both support and opposition.
Supportive
- Connecticut Bankers Association (but with amendments)
- Responsible Business Lending Coalition
- Innovative Lending Platform Association
Opposed
- Electronic Transactions Association
- Revenue Based Finance Coalition
- Small Business Finance Association
MJ Capital Had Thousands More Investors Than Previously Believed
March 28, 2022
An amended complaint filed last week by the SEC against MJ Capital Funding, LLC et al. revealed a shocking new assessment, that the alleged ponzi scheme attracted more than four times the amount of investors originally believed. With more than 9,000 investors now accounted for, the number has continued to shoot up since the case was first filed last August.
Between them all, MJ Capital collected $194.1M in investor funds, the amended complaint states. $56M of it was allegedly misused through payments made to various entities, “a substantial portion of which represent payments to sales agents for promoting the investments in the MJ Companies.” Another $64M was paid back to investors as purported returns from the company’s business operations.
Those operations were minuscule, the SEC claims. MJ Capital is alleged to have only allocated $872,000 towards the line of work it claimed to be operating in.
Possessing the hallmarks of a classic ponzi scheme, the SEC further said that “the only way the MJ Companies could honor their obligations to investors would be by successful continuation of their fraudulent scheme. Once the supply of new investors was exhausted, the MJ Companies would be unable to pay the promised returns to existing investors.”
IOU Financial Originated $161.5M in Loans in 2021
March 22, 2022
IOU Financial is coming off of its biggest year ever. The company has revealed total loan originations of $161.5M for 2021, up nearly 100% year-over-year. The figure puts it ahead of rival Funding Circle USA in 2021, according to origination data compiled by deBanked.
In a public statement, IOU President and CEO Robert Gloer said, “The success of IOU’s marketplace strategy announced in 2021 is allowing us to scale up faster than previously possible. We’re proud of the team for breaking new origination records and giving us the extra latitude to further reduce corporate debt.” The latter comment was in reference to the company’s intention to repurchase approximately $1.2 million of its convertible debentures at par.
IOU’s full year 2021 financials are expected to be released next month.
