Articles by deBanked Staff

Shopify Capital Originated $141M Of Loans And MCAs In Q3, Says It’s a Meaningful Part Of The Shopify Business

October 29, 2019

Shopify Capital, Shopify’s small business funding division, originated $141 million in loans and merchant cash advances last quarter, an 85% increase over Q3 last year.

The company has now cumulatively originated $768.9M since it began funding in April 2016.

On the earnings call, Shopify COO Harley Finkelstein commented on the company’s recent initiative to fund non-Shopify payment merchants by saying that “while it’s still early, we’re seeing strong adoption from those merchants.”

“We started Shopify Capital to help solve another playing field for entrepreneurs, access to capital to grow their businesses,” he explained. “This is especially true as merchants gear up for their busiest selling season of the year.”

When asked about how funding would play a role in the company’s long term expansion and retention plans, Finkelstein said the following:

[P]art of this is making sure that we have merchants in the entirety of their journey to success, certainly things like having additional cash for things like inventory and marketing are very important to them. And there’s not too many place to get that with capital. So we think we’re helping merchants by doing this. It also serves of course as a way to retain merchants because we’re not only now their e-commerce platform or the point sale provider or the payments provider, we’re also now in some cases playing the role of their capital provider.

So this is a meaningful part of our business, and it keeps growing, and it’s certainly something we’re very proud of. And in terms of managing the risk, it’s something we keep a close eye on. We do a ton of trade forecasting and ensuring that we look at the data to update our models as we see trends changing. That being said, it’s important to remember that most of the capital that we put out there is insured by our partner EDC.

So we think that we continue to grow the capital business at the same time manage the risk and so we’re not doing anything that is outside of that loss ratio and risk exposure comfort zone that we think we have right now.

Shopify CEO Tobi Lutke later added how their Capital division adds to their Gross Merchandise Value (GMV) because merchants use funds to build their businesses.”What happens is a lot more businesses, that otherwise would not have access to loans get them and therefore actually continue building their business.”

Attorney Pleads Guilty In 1 Global Capital Securities Fraud Mess

October 25, 2019

Article by: deBanked Staff

Jan Douglas Atlas, a Florida attorney that was arrested last month for his role in the 1 Global Capital debacle, entered a plea of guilty on Wednesday to 1 count of securities fraud. 74-year-old Atlas also agreed to be disbarred.

The charges stem from his willingness to sign an opinion letter that claimed investment opportunities being offered by 1 Global were not securities when he knew that they actually were.

1 Global collapsed last year amid investigations by the SEC and US Attorney’s office and the discovery of a massive discrepancy in the company’s accounting records. Atlas is the 2nd person to be criminally convicted. 1 Global’s chairman consented to judgment with the SEC but has not been criminally charged. Court records indicate he has already satisfied the vast majority of the SEC’s judgment.

The set of facts established by prosecutors and Atlas in his guilty plea suggest that additional individuals could still be criminally charged.

You can read his guilty plea here

OnDeck Repurchased 3.2M Shares, Reports $8.7M Q3 Profit

October 24, 2019

Article by: deBanked Staff

OnDeck announced this morning that it has repurchased 3.2M of its own shares for $11M since making its buyback announcement on July 29th. The company intends to repurchase another $39M worth.

OnDeck was profitable in Q3, reporting a net income of $8.7M on originations of $629M. Although that was an increase over the previous quarter, the year-over-year decline was said to be a reflection of “tightening underwriting criteria and market dynamics.”

The average term loan was for $56,000 with an average maturity of 13 months. The company’s line of credit program is growing and now accounts for 21% of the company’s total loans and finance receivables at quarter-end, up 15% from last year.

“OnDeck expects the current operating environment to extend into 2020 with increased profitability,” their quarterly report said.

LendIt China 2019 is Canceled

October 23, 2019

Article by: deBanked Staff

LendIt Fintech has officially announced that there will be no conference in China this year after 3 long years in the country. A blog post written by LendIt Fintech co-founder Peter Renton explained that calamitous events engulfing the peer-to-peer lending industry there, namely the abundance of fraud, and the government’s waning tolerance, has led them to believe that no lending companies will be interested in speaking, sponsoring or even attending this year.

“We will regroup in 2020 and hopefully will be able to bring our unique event back to China,” Renton wrote.

The decision only applies to their Lang Di Fintech China event. Their US event is scheduled to take place in New York this year on May 13-14 at the Javits Center. That event will be immediately followed by deBanked’s Broker Fair 2020 at the brand new Convene at Brookfield Place on 225 Liberty Street in New York on May 17-18.

Google Bans Loan Apps From App Store If Personal Loan Offers Exceed 36% APR

October 12, 2019

Article by: deBanked Staff

Google is implementing new rules for consumer lenders who have apps in the Google Play app store. And they’re pretty strict. If a lender offers loans that exceed 36% APR, their app will be banned. If the repayment period of the loan is 60-days or less, the app will be banned.

It doesn’t matter what lenders call these loans, at least according to Google’s updated policy. “Peer-to-peer loans” were used as just one example of a loan category subject to the new rules.

Despite the new rules and a WSJ story announcing that payday loans had been shut out of the platform, deBanked determined that hundreds of payday loan apps are still available for download. This includes Nas-backed Earnin which is under investigation by regulators in multiple states.

Google banned payday loan ads from its search result pages in 2016. The move was viewed in some circles as hypocritical since Google’s VC arm, Google Ventures, had just invested in a payday lender (LendUp) that offered loans in excess of 400% APR. However, LendUp was also affected by the ban, a move that LendUp’s then-CEO Sasha Orloff embraced. Orloff blogged about the irony, writing, “If effectively enforced, Google’s ban will push the payday loan marketing competition away from ads and toward natural search, where safer alternatives with quality content can shine.”

Perhaps Google aims to achieve a similar objective with its app store.

The full text of Google’s new personal loan rule for its app store is below:

We define personal loans as lending money from one individual, organization, or entity to an individual consumer on a nonrecurring basis, not for the purpose of financing purchase of a fixed asset or education. Personal loan consumers require information about the quality, features, fees, risks, and benefits of loan products in order to make informed decisions about whether to undertake the loan.

Examples: Personal loans, payday loans, peer-to-peer loans, title loans

Not included: Mortgages, car loans, student loans, revolving lines of credit (such as credit cards, personal lines of credit)

Apps for personal loans must disclose the following information in the app metadata:

Minimum and maximum period for repayment

Maximum Annual Percentage Rate (APR), which generally includes interest rate plus fees and other costs for a year, or similar other rate calculated consistently with local law

A representative example of the total cost of the loan, including all applicable fees

We do not allow apps that promote personal loans which require repayment in full in 60 days or less from the date the loan is issued (we refer to these as “short-term personal loans”). This policy applies to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders.

High APR personal loans

In the United States, we do not allow apps for personal loans where the Annual Percentage Rate (APR) is 36% or higher. Apps for personal loans in the United States must display their maximum APR, calculated consistently with the Truth in Lending Act (TILA).

This policy applies to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders.

New York Attorney General Secures Judgment Against Cardis Enterprises International

October 11, 2019

Article by: deBanked Staff

New York Attorney General Letitia James announced today that she had secured default judgments against numerous entities and individuals involved in a $30 million fraud.

In December 2018, the New York Attorney General’s Office filed suit against Cardis and company personnel Aaron Fischman, Stephen Brown, Steven Hoffman, and Seth Rosenblatt for participating in the fraudulent marketing of Cardis to investors. The complaint further alleged that, while Cardis was raising significant investor funds, Fischman was fraudulently diverting much of the proceeds to enrich himself, family members, and his favored charities.

Default judgments were entered against Cardis Enterprises International N.V., Cardis Enterprises International (U.S.A.) Inc., Cardis Enterprises International B.V., and Chosen Israel LLC, along with several individuals related to Aaron Fischman as relief defendants.

“The case remains ongoing with several motions pending,” the AG wrote in a public statement, “including a motion for leave to amend the complaint to re-plead claims against Stephen Brown (who was previously dismissed from the case) and the remaining defendants.”

Coinbase Begins Paying Interest Rewards On Crypto Holdings

October 2, 2019

Article by: deBanked Staff

Bitcoin’s price might not be all that right now, but Coinbase, a US-based digital currency wallet, wants to pay its customers a reward for holding on to its stablecoin. Unlike Tether, a popular stablecoin that was purportedly fully backed by US dollars but then revealed it wasn’t, Coinbase’s stablecoin is fully backed by dollars on deposit in a bank.

The advantage of a stablecoin, in theory, is the stability and safety of the US dollar combined with the fluidity of cryptocurrency. Coinbase’s stablecoin is called USDC and as of Wednesday, the company will begin paying holders of the coin an annualized reward of 1.25% APY. That’s a little bit less than a high yield savings account. It’s interest but it’s technically not. Unlike a bank, Coinbase won’t be using your funds to facilitate loans to generate income so that it can pay out interest to depositors. Instead, the company claims, “You simply earn while storing your crypto safely on Coinbase.”

Coinbase disclaims the offer by reminding users that their funds are not FDIC insured and that the digital wallet is not a deposit account or savings account.

$176 million of USDC exchanged hands in the last 24 hours as of this post being written.

The crypto faithful, users whose optimism in cryptocurrency has been unwavering, have quietly been looking for an alternative stablecoin to Tether. Tether has been locked in a battle with the New York Attorney General and recently revealed in court documents that its stablecoin was not as well backed as the company had claimed.

deBanked Around The World

September 28, 2019

Article by: deBanked Staff

Members of the deBanked editorial team returned from Ireland this week. The Republic of Ireland will be the latest in our international series on nonbank finance. Stay tuned for our stories on that.