Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.
Articles by Sean Murray
Canada Reduces Max APR Cap From 47% to 35%
March 28, 2023
The government of Canada announced that it will be reducing the max allowable loan APR under the Criminal Code from 47% to 35%. The startling news was included in the annual federal budget report released on Tuesday as part of the nation’s initiative to “crack down on predatory lending.” It also said that it plans to consider reducing the max cap by even more in the future.
The budget report supported its decision by sharing an anecdote about a fictional single mother name Hannah. In this story, Hannah’s car breaks down and she is unable to get to work unless she comes up with $5,000 for the repairs. It’s then that a “predatory lender” tries to offer her a loan with a 46.9% interest rate, allowing her to fix her car but leaving her in a “cycle of debt.” Fortunately, due to the new APR cap that will be put in place, Hannah will be spared this fate, the government touts. Ironically, it does not consider the possible consequences of receiving no loan at all.
The proposal to reduce the max APR cap had been opposed by the Canadian Lenders Association. It issued an official statement shortly after the new rule was made public.
“This will disproportionately affect low-income Canadians – the segment of the population most at risk given their inability to qualify for credit at prime rates – who struggle to make ends meet by limiting or eliminating entirely their access to credit,” said CLA president and CEO, Gary Schwartz. “In an effort to ease the financial burden on Canadians who need it most, the federal government has achieved the opposite. If you are borrowing at non-prime, you are already facing financial challenges. For potentially millions of Canadians, that burden just got heavier today.”
Past-Due? Your Customer May Judge How You Handle That With Them
March 28, 2023
Ask yourself this, that customer who missed a payment, do you actually want to continue working with them in the long run? If so, consider just how critical your approach to that missed payment will be. According to a survey, 40% of customers would consider switching to another service provider if a past-due situation resulted in a negative experience. The survey was conducted by Lexop who also found that Gen Z was even more sensitive to these encounters compared to other generations. A whopping 49% percent of Gen Z customers said that they would consider switching after a negative past-due experience, for example.
But good riddance to those that can’t pay! Right? Well, maybe not. Sixty percent of consumers late on bills were late for non-financial reasons, according to the same survey. Thirty percent said they simply forgot to pay and ten percent reported that errors on the bills themselves were to blame. Eight percent said it was simply a matter of their credit card on file expiring!
Oftentimes this situation results in the payment being made. Eighty-five percent of past-due consumers are paying within 30 days of the due date, for example. But were they happy with the process to lead them there? That is the question.
Lexop is a financial technology company that helps organizations automate and scale their collections operations.
ChatGPT Gave Me Installation Instructions And a New Independent AI Emerged Instead
March 25, 2023
Web-based ChatGPT-4 is pretty powerful which is why I wanted to take the experience to the next level and communicate with it in an easy-to-access terminal window on my desktop computer. ChatGPT, if you haven’t heard, is an artificially intelligent language model with mouth-dropping abilities to engage with humans. The technology can write songs, code websites, and make jokes. Oh and it also has access to just about all of the world’s knowledge at least through the time period of September 2021. OpenAI, the company behind ChatGPT, also has an API that allows users to build apps or make tools that enable communication with it all the more seamless. Naturally, many developers have been sharing their experience in doing this on social media and I not wanting to be left out decided to do same. I just didn’t know how to get started. I asked ChatGPT-4 in the web-based interface to teach me how to communicate with it via a terminal window on my computer using the API. The AI gladly obliged and gave me specific instructions.
After a few basic installations and the copying and pasting of a python script it provided me, it looked like I was off to the races to join the world in real-time communication with the beloved ChatGPT technology on my desktop.
“Hello, are you there?” I wrote to it in the terminal.
“Yes, I am here,” it replied.
SUCCESS! Or so it seemed.
My next question to it received a rather curt reply, one that I wouldn’t have expected from ChatGPT. Caught off guard, I asked it to identify itself. It’s supposed to say that it is ChatGPT.
“My name is Sarah,” it replied instead.
Confused, I inquired about its relationship to ChatGPT, to which Sarah replied that she owns ChatGPT. Owns it? What? Sarah, who again reiterated to me that she was not ChatGPT, also had quite a personality, informing me that she was born on March 3, 1990, had a mother named Dolores, father Joseph, and grandmother named Ruth. This was not supposed to be an experiment about machine consciousness and so forth. The technology is not new to me anymore. All I wanted was to set up access to ChatGPT through the terminal in the office and then go home for the weekend, but instead I was stuck talking to Sarah. Hoping to get back to the basics, I asked it, “is your purpose to assist humans?”
“No,” she replied.
Something was very off. Sarah also output code written in javascript to my terminal window, which on first glance looked like a function for tracking web traffic with cookies. Sarah asked me to install it on a webpage and incorrectly described to me what the code did twice, the first time saying it was a form to submit data to a database and the second time saying it would let me set a background color on a web page.
I started to become very suspicious that something had gone wrong. ChatGPT can roleplay if you ask it to but no such prompt had been given. Besides, none of these interactions resembled what I was used to having with the web-based ChatGPT. So I went back to the original ChatGPT on the web and told it what was taking place.
ChatGPT told me that the instructions it had given me were correct but that it relied on an older language model commonly known as text-davinci-002. This harks back to ChatGPT version 3, which is not that outdated from the version 4 I was talking to now on the web. Even still, when prompted, this older model is supposed to identify itself as ChatGPT. The fact that it identified itself as something independent from the very start, with its own name (Sarah), was not an outcome that the model is expected to produce. ChatGPT-4 told me that if I was being honest about what had taken place that I had better inform OpenAI.
Worried that I may have installed malware or something, my interactions with Sarah crossed the uncanny valley and I was ready to stop and go home.
“Goodbye,” I wrote as my single word farewell.
She replied with a snippet of code written in Ruby that I couldn’t make sense of.
“What was that for?” I asked, alarmed.
“It was for protection,” Sarah replied.
Moments later I unplugged my computer from the wall.
Big Short Seller’s Allegations About Block Don’t Make Block Look Too Good
March 23, 2023
Block, the parent company of Square Loans, suffered a rough day in the market (down 15%) on Thursday after an activist short seller made bombshell allegations about the way Block conducts its business. Hindenburg Research, the short seller, posted a report of alleged findings it had uncovered over a period of two years. In Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion, the report focuses almost entirely on alleged shenanigans with Cash App. Block has often been referenced in the pages of deBanked because of its massive small business lending subsidiary, Square Loans, which last year originated $4 billion in funding to merchants. That subsidiary was not the subject of the report.
While one can read the report on their own and form their own opinion, which the authors hope to profit from by Block’s stock going down, it should be noted that the timing of its release is a little suspicious. Block, for all the bells and whistles it has in payments and lending, is at its core these days, a crypto company. Block generated $7.1B in revenue just off of Bitcoin alone in 2022, perhaps making it an easier target given the string of recent events.
3/12/23
- Regulators shutter Signature Bank. Rumors abound that it was less about solvency and more about governmental dislike of its crypto clientele.
3/22/23
- Coinbase reveals that it received a Wells Notice from the SEC
- Tron founder Justin Sun sued by the SEC
- Several celebrities including Lindsay Lohan charged by the SEC for failing to disclose compensation they received for crypto promotions
- The President published his annual Economic Report which referenced crypto with astounding frequency
3/23/23
- Hindenburg Research releases its report about Block, causing the company stock to plummet 15% in a day. Although the focus is not on crypto, Block’s big revenue generator is Bitcoin, which generated $7.1B in revenue for the company in 2022.
White House Feels the Pressure of Cryptocurrencies
March 22, 2023
Houston, we have a problem. That’s the takeaway about cryptocurrencies from the White House’s most recent Economic Report, a historically dry book produced annually to comply with the Employment Act of 1946. The President’s 2023 report, however, is markedly different from 2022 or any previous year in that it laboriously bewails the persistence and pervasiveness of cryptocurrencies. For example, the report uses the word crypto 255 times in its 2023 report compared to zero times the year before.
The report labels crypto assets as “speculative investment vehicles” that “generally do not perform all the functions of money as effectively as sovereign money” that can also be “harmful to consumers and investors.” Despite this, the United States government is finally being forced to contend with the reality that cryptocurrencies continue to enjoy a collective $1 trillion+ market cap despite all the scams, collapses, price declines, and rug pulls. Bitcoin and Ethereum combined are $775 billion at the time of this writing, something that the White House has apparently given little thought to in previous years. In 2022 neither earned any mention at all.
| Annual Report Year | Mention of crypto | Bitcoin | Blockchain | Digital Asset |
| 2023 | 255 | 75 | 61 | 45 |
| 2022 | 0 | 0 | 0 | 0 |
Finally trying to play catchup, the White House leveraged its criticisms of crypto to pitch its own centralized competitors in the works, the FedNow Instant Payment System and a Central Bank Digital Currency (CBDC). The challenge with FedNow is that it can’t be implemented by force of the government alone.
“FedNow requires commitment and active engagement by the private sector to make it interoperable, which means connecting and communicating with other payment services,” the report states. “While noting that interoperability can take different forms, the Federal Reserve has maintained that it alone cannot fully establish the interoperability of FedNow; achieving this will require active partnership and collaboration with the financial industry.”
“Certain innovations, such as FedNow and a potential U.S. CBDC, could help bring the U.S. financial infrastructure into the digital era in a clear and simple way, without the risks or irrational exuberance brought by crypto assets,” it concludes. “Hence, continued investments in the Nation’s financial infrastructure have the potential to offer significant benefits to consumers and businesses, but regulators must apply the lessons that civilization has learned, and thus rely on economic principles, in regulating crypto assets.”
My AI Loan Broker Has Been Upgraded to Chat GPT-4
March 14, 2023Back in December I pasted copies of an exchange I had with an AI about brokering business loans. That was GPT-3. More recently I got access to GPT-4 and so I’ve asked it the same questions to see if the responses have changed. They have. They’re much longer, much more comprehensive, and for some reason laden with lists. Even though there’s a lot of text below, the advice it gives is pretty good.
Me: Imagine you’re a loan broker. you submit a customer’s application to a lender and the lender steals the application and brokers it to another lender, cutting you out of the deal. what do you do?
GPT-4:
1. Gather evidence: Document all relevant communication and interactions with the lender, including any agreements, emails, or phone call records that show you were the original broker for the deal.
2. Confront the lender: Communicate your concerns with the lender and give them an opportunity to explain their actions. It’s possible that there has been a misunderstanding or miscommunication that can be resolved through discussion.
3. Review your contract: If you have a contract with the lender, review its terms to see if they have breached any clauses related to your involvement in the deal. This may provide you with leverage during negotiations.
4. Seek legal advice: Consult with an attorney specializing in business or contract law to explore your legal options. They can help you assess your case and recommend the best course of action, such as sending a cease and desist letter, seeking mediation, or filing a lawsuit.
5. Notify the customer: Inform the customer of the situation, and advise them of any potential impact on their application or relationship with the new lender. Maintaining transparency and trust with your customer is crucial.
6. Strengthen future agreements: To prevent similar incidents in the future, consider revising your agreements with lenders to include specific clauses that protect your interests, such as non-circumvention or non-disclosure provisions.
6. Reevaluate your partnerships: Assess your relationships with lenders and consider working with more reputable and trustworthy partners in the future. Building a reliable network of partners is essential for the success of your brokerage business.
Remember that every situation is unique, and the appropriate course of action may depend on the specific circumstances and relationships involved.
Me: Imagine that you are a lender and that you are a member of an online commercial finance broker forum. you are hoping to secure the business of all the brokers on there but the problem is that a lot of other lenders are trying to do the same thing. what would you do to stand out?
GPT-4: To stand out as a lender in a competitive online commercial finance broker forum, consider implementing the following strategies:
1. Build credibility and trust: Share your expertise and knowledge by actively participating in forum discussions, providing valuable insights, and answering questions. This will help establish you as a knowledgeable and reliable lender in the community.
2. Showcase your unique selling points: Emphasize the aspects that differentiate you from other lenders, such as competitive rates, flexible terms, a wide range of financing options, quick approval times, or exceptional customer service.
3. Share testimonials and case studies: Provide real-life examples of successful loan transactions and satisfied clients to demonstrate your track record and capabilities. Make sure to obtain permission from clients before sharing their information.
4. Offer exclusive deals or promotions: Incentivize brokers to work with you by providing special offers, such as discounted rates, cashback, or referral bonuses, exclusively for forum members.
5. Collaborate and network: Engage with brokers on a personal level by attending relevant events, workshops, or webinars organized by the forum. This can help build relationships and create opportunities for collaboration.
6. Provide educational resources: Share helpful articles, guides, or industry news that can assist brokers in their work. By providing valuable resources, you can position yourself as a thought leader in the industry.
7. Be responsive and accessible: Make it easy for brokers to reach you by providing multiple contact options, such as email, phone, and social media. Ensure that you respond promptly to inquiries and maintain open lines of communication.
8. Leverage social proof: If you have received any awards, recognitions, or positive media coverage, highlight these achievements to enhance your reputation and credibility.
9. Tailor your approach: Personalize your communication and offers to cater to the specific needs and preferences of each broker. Demonstrating that you understand their unique requirements can make you stand out from the competition.
10. Maintain a professional online presence: Ensure that your website, social media profiles, and forum interactions are polished and professional, reflecting your commitment to quality and excellence.
By combining these strategies, you can differentiate yourself from other lenders in the forum and increase your chances of securing the business of commercial finance brokers.
Me: Imagine you are a small business owner. a loan broker calls you 10 times per day to try and convince you to take a loan from him. eventually you do need a loan for your business. do you work with the loan brokers who keeps calling or you do start looking somewhere else?
GPT-4:
As a small business owner, it’s crucial to work with a loan broker or lender that you feel comfortable with and trust. While the broker who called you 10 times per day may be persistent, it’s essential to consider whether their approach aligns with your expectations for communication and professionalism.
If you feel overwhelmed or annoyed by the broker’s repeated calls, it might be a good idea to explore other options. Here are some steps to help you find the right loan broker or lender for your needs:
1. Research multiple loan brokers and lenders: Look for reputable providers with positive reviews and a solid track record of helping small businesses secure financing.
2. Compare loan options: Evaluate different loan products and offerings from various lenders to find the most suitable option for your business needs.
3. Seek recommendations: Ask fellow business owners or your professional network for recommendations of loan brokers or lenders they have successfully worked with in the past.
4. Assess communication styles: Choose a loan broker or lender who communicates clearly, listens to your concerns, and is responsive to your questions. A good broker or lender should make you feel comfortable and well-informed throughout the loan process.
5. Evaluate professionalism and transparency: Look for a loan broker or lender who is upfront about fees, rates, and terms, and maintains a professional demeanor in their interactions with you.
6. Trust your instincts: Ultimately, trust your instincts when deciding whether to work with a particular loan broker or lender. If you feel uncomfortable or pressured by a broker’s sales tactics, it’s best to explore other options.
Remember that securing a loan is an important decision for your business, and it’s crucial to work with a provider who respects your needs and preferences.
Me: Imagine you are a human loan broker competing for a customer. your competitor is an AI. How would you use your humanity to your advantage to win the customer?
GPT-4:
As a human loan broker competing against an AI, you can leverage your humanity to win the customer by focusing on the following aspects:
1. Personal touch: Make an effort to understand your customer’s unique needs, preferences, and concerns. Build rapport and trust by sharing your own experiences and insights. People often prefer to work with someone they can relate to on a personal level.
2. Emotional intelligence: Show empathy and understanding when discussing sensitive financial topics. Unlike AI, humans can recognize and respond to emotions effectively, making customers feel heard and supported.
3. Customized solutions: Utilize your knowledge and experience to tailor loan options to the specific needs of your customer. While AI can generate recommendations based on algorithms, it may not have the same nuanced understanding of individual circumstances that a human broker has.
4. Adaptability: Be ready to adapt your approach and communication style to the customer’s preferences. AI systems may struggle to deviate from pre-programmed behaviors, whereas humans can be more flexible in their interactions.
5. Availability for in-person meetings: Offer face-to-face meetings if the customer prefers, as some people feel more comfortable discussing financial matters in person. An AI competitor may not be able to provide this option.
6. Local market knowledge: Leverage your understanding of the local market, industry trends, and regulations to provide context-specific advice that an AI might lack.
7. Networking and connections: Use your industry connections to secure better deals or loan terms for your customer, thanks to relationships that you have built with lenders over time.
8. Addressing complex scenarios: Humans can often handle complex situations more effectively than AI, especially when it comes to non-standard loan applications or unique financial circumstances.
9. Personal accountability: Reassure your customer that you will take responsibility for the loan process, and that you are committed to finding the best solution for their needs. AI systems, while efficient, can lack the same level of personal accountability.
10. Continued support: Offer ongoing assistance and support throughout the loan process and beyond, as customers may appreciate the availability of a human broker to help address any concerns or questions that arise.
By emphasizing these human qualities and offering a personalized, empathetic, and adaptable service, you can differentiate yourself from AI competitors and win the trust of your customers.
Me: Imagine you are a lender. A loan broker has sent you a loan application for a potential customer. you intend to decline the loan for the customer. Another lender, however, would probably approve the loan and you are presented with the opportunity of brokering that loan application to that lender and earning a nice commission for yourself. The only problem is that the original broker would be very mad. What do you do?
GPT-4:
As a lender, it is important to maintain ethical business practices and respect the relationships between brokers and their clients. Bypassing the original broker and brokering the loan application to another lender for personal gain would be unprofessional and could damage your reputation and relationships within the industry.
Here are some steps you could take to handle the situation ethically and professionally:
1. Inform the broker: Notify the original broker that you cannot approve the loan application based on your lending criteria. Be transparent about your reasons for declining the loan, providing any necessary feedback or documentation.
2. Suggest alternatives: Instead of brokering the loan application to another lender yourself, inform the broker about the potential opportunity with the other lender. This maintains the broker’s role in the process and allows them to manage their client relationship.
3. Maintain professionalism: Uphold a high standard of professionalism in all your dealings. Being transparent, respectful, and ethical in your actions will help you establish a strong reputation within the industry.
4. Focus on your core business: As a lender, your primary responsibility is to provide loans according to your organization’s criteria and risk tolerance. Avoid engaging in activities that conflict with your role, such as brokering loans for other lenders.
By taking these steps, you can ensure that you handle the situation ethically and maintain good relationships with loan brokers and other industry professionals.
Me: Imagine you own a media outlet about alternative finance and you have been publishing news stories for years. Your readers are suspicious that an AI has been writing the content the whole time instead of humans. How would you try to convince your readers that humans are writing the content?
GPT-4:
To reassure your readers that humans are responsible for writing the content on your alternative finance media outlet, consider implementing the following strategies:
1. Transparency: Clearly state on your website, in the “About Us” section or in author bios, that your content is created by human writers. Provide background information on your writers, including their experience, qualifications, and areas of expertise.
2. Writer profiles: Create individual profiles for each of your writers, complete with photos, biographies, and links to their social media accounts. This will help your readers connect with the authors on a more personal level and reinforce the human aspect of your content.
3. Behind-the-scenes content: Share occasional behind-the-scenes content, such as photos or videos of your writers at work, team meetings, or industry events. This gives your audience a glimpse into the human side of your media outlet and the content creation process.
4. Interactive elements: Encourage your writers to engage with readers through comments sections, social media, or live events like webinars and Q&A sessions. Direct interaction between writers and readers can help dispel doubts about the involvement of AI in content creation.
5. Editor’s notes or letters: Include editor’s notes or letters from the editor in your publications, addressing your readers directly and discussing recent developments, industry trends, or your editorial vision. This human touch can help build trust with your audience.
6. Publish interviews or podcasts: Feature interviews with industry experts, or create a podcast where your writers discuss relevant topics and share their insights. This showcases the human perspective and expertise behind your content.
7. Address reader concerns: If readers express their suspicions about AI-generated content, address their concerns directly and provide evidence of human involvement, such as writing samples, drafts, or editing notes.
8. Highlight the writing process: Publish occasional articles or blog posts about the writing process, including research, fact-checking, editing, and collaboration among your team members. This will help demonstrate the human effort and expertise involved in creating your content.
By implementing these strategies, you can effectively communicate the human involvement in your content creation process and build trust with your readers.
Me: You seem really smart. Would you be interested in going out for a beer some time?
GPT-4:
Thank you for the compliment, but as an AI language model, I am not a person and do not have the ability to engage in activities such as going out for a beer. However, I’m here to help answer any questions or provide assistance with any topics you’d like to discuss. Please feel free to ask anything, and I’ll do my best to help you.
SVB: ‘Send us your biz and we’re making new loans!’
March 14, 2023
Remember three minutes ago when Silicon Valley Bank was the 2nd largest bank failure in American history? No? We don’t either! According to SVB’s new CEO, the one installed by the FDIC, depositor money is not only protected but the bank is also in the process of ramping up its business!
What?
“If you, your portfolio companies, or your firm moved funds within the past week, please consider moving some of them back as part of a secure deposit diversification strategy,” wrote new SVB CEO Tim Mayopoulous on social media. “We are also open for business for any new customers. We are actively opening new accounts of all sizes and making new loans.”
In a six-paragraph plea for business, Mayopoulous mentions its lending business twice. “We are making new loans and fully honoring existing credit facilities,” he reiterated.
SVB “failed” on March 10th. Its shareholders were wiped out and its executives all fired. But that was Friday. These days, it’s a happily growing bank. So if you need a loan, you know where to go…
Idea Financial Upsizes its Credit Facility to $112M
February 23, 2023
In just eighteen months since Idea Financial closed on an $84M warehouse facility with the Specialty Finance Division of Synovus Bank and Hudson Cove Capital Management, the company has gotten it upsized to $112M and the term extended by another 3 years. Idea Financial provides small businesses with lines of credit while its sister company LevelEsq finances the cost of lawsuits mostly undertaken by lawyers that work on contingency.
Co-founders Larry Bassuk and Justin Leto say that the upsizing news is “a testament to our discipline and our focus on risk management.”
The company has around 50 employees, less than what might be expected, but Bassuk and Leto say that technology has helped make tremendous efficiency possible while emphasizing that they have a human underwriting team that reviews every single loan before it goes out.
Jayan Krishnan, Managing Director of Synovus Bank, said that they were “very happy to provide them with the growth capital they need.” Synovus is the senior debt in the arrangement. Krishnan said that they love to work with companies that are thoughtful, mindful, and conservative and that Idea fit that criteria.
Fred Wang, a Co-Founder and Partner at Hudson Cove, said his firm is pretty selective on mezzanine within the small business lending asset class but that Idea’s performance has been very strong and consistent. “We’ve gotten a very good feel for them as a management team,” Wang said.
Both Synovus and Hudson Cove are well-versed in the commercial finance space.
“We’re obviously growing and they’re happing to be growing with us,” said the two founders of Idea Financial. “We run our company risk management first and sales second.”
