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
Mayor Rahm Emanuel Cuts Ribbon for 160% APR Online Lender
October 11, 2017Chicago Mayor Rahm Emanuel cut the ceremonial ribbon at OppLoans’ new headquarters in Chicago this week. The APR of a typical installment loan is 160% APR in many states, according to the OppLoans website. In South Carolina, a typical loan is listed as 199% APR over 9-18 months.
Today we cut the ribbon on @OppLoans' new office in Chicago. pic.twitter.com/SAROJfCTcE
— Mayor Rahm Emanuel (@ChicagosMayor) October 9, 2017
According to a press release, Emanuel said “While for a lot of people outside this room, this may be the first time they’ve heard of OppLoans. There is no doubt in my mind this will not be the last time they’ve heard of OppLoans. I look forward to being back as you scale more mountains, more heights, and continue to grow and to be successful, and to offer financing to a lot of families.”
While OppLoans offers consumer loans, Emanuel has previously attacked small business finance products with lower costs than OppLoans as predatory. Perhaps he has reevaluated his understanding of APR.
Google Restricts Ads for Merchant Cash Advances
October 8, 2017Google’s quest to stamp out payday loan advertisements from its paid search results has caused collateral damage to merchant cash advances. That’s because the two-word term cash advance, often synonymous with payday loan, appears to now have a blanket restriction that blocks ads whenever that term is included in search, regardless of the words that come before it or after it.
Merchant cash advances, however, are commercial factoring transactions with no relation to payday or consumer finance.
A user on the deBanked forum first alerted me on October 5th and deBanked conducted tests from internet connections in two states to see if we could replicate the results. Below is a sample of our results:
| Keyword | Google Adwords Status |
| cash advance | BLOCKED |
| merchant cash advance | BLOCKED |
| business cash advance | BLOCKED |
| business loan | ACCEPTED |
| loans | ACCEPTED |
| get a business loan | ACCEPTED |
| loan for my business | ACCEPTED |
| cash advance for my business | BLOCKED |
| business loan companies | ACCEPTED |
| merchant cash advance companies | BLOCKED |
| factoring or business loans or credit cards | ACCEPTED |
| factoring or business loans or merchant cash advances | BLOCKED |
| loan from ondeck | ACCEPTED |
| cash advance from ondeck | BLOCKED |
| consolidate loans | ACCEPTED |
| consolidate cash advances | BLOCKED |
No such block exists on rival search engine Bing.
Though Google has not said this, the mass removal of payday lending ads, once a massive source of revenue for them, is likely the result of government pressure. Over the last two years, federal regulators have begun targeting lead generation sites that direct users to lenders in a misleading manner.
Unless Google fixes the glitch that caused merchant cash advances to get wrapped up with consumer cash advances, the organic search results will experience a huge boost in value. Last month we reported that companies like OnDeck, Fundera, and Nerdwallet were winning the search engine optimization battle for several keywords including merchant cash advance. Absent any ads, those companies and several others will now benefit from a stream of free traffic and applicants for which their cost of acquisition will be zero dollars.
Perhaps little has been mentioned about this ban within the industry because the end result is FREE leads for those that rank well organically. Long live SEO!
Dear MCA and Business Loan Brokers, It’s Time
October 5, 2017
It’s been two years since the Year of the Broker was published. And it’s been many more than that since the last time I brokered a deal myself. Though I’ve only been writing about merchant cash advances (MCAs) and non-bank business loans for seven years here, my involvement in that industry started more than a decade ago. In all that time I’ve gone to countless trade shows, conferences, networking events, meetups and discussion sessions. To their credit, many of those provided excellent value across the spectrum of finance or payments, but none ever quite fully gripped an industry that is now pumping out approximately $15 billion to small businesses each year.
MCAs and online business loans are still overwhelmingly facilitated by salespeople, whether they’re employed by direct capital providers or independent sales organizations and brokers. Notably, a recent survey of industry CEOs suggested that in the last two years, the industry has come to rely even more on brokers for originations despite the belief that their reliance on them would decrease. An average of 64% of originations are currently coming from external sources/ISOs, the survey revealed.
Even salespeople at direct capital providers can find themselves playing the role of adviser or middleman when the solutions they offer in-house are not the right fit for a prospect. Small businesses need someone to help them navigate the massive universe of options and have that person be able to explain those options correctly. It only makes sense then that there would be an annual gathering of brokers, lenders, and MCA funders where all of those salespeople and their colleagues come together. Much to my disappointment (and I’m not alone in that) I’ve never found such an event.
I expect that will change in 2018. I truly believe dear friends that it’s time…
Update: Meet Broker Fair 2018
ISOs Alleged to Be Partners in Debt Settlement “Scam” in Explosive Lawsuit
September 28, 2017
ISOs and brokers referring deals to debt settlement companies should pay attention to a lawsuit that was filed in the New York Supreme Court on Wednesday. In it, plaintiffs Yellowstone Capital and EBF Partners (“Everest Business Funding”) allege that certain ISOs are culpable partners in a scam that nefarious debt settlement companies are perpetrating on small businesses.
The debt settlement companies “mislead the merchants as to the services they will perform and the cost to the merchant, and they also conceal their relationships with the ISO Defendants and the fact that they or their affiliates are introducing these same merchants to merchant cash advance providers like Plaintiffs only to later induce those merchants to breach their agreements with their cash advance providers,” the complaint states.
Among the named defendants are:
- Corporate Bailout, LLC
- Mark D. Guidubaldi & Associates, LLC dba Protection Legal Group
- PLG Servicing LLC
- American Funding Group
- Coast to Coast Funding, LLC
- ROC South, LLC
- Mark Mancino
Several defendants are already best known for running an office “so sexually aggressive, morally repulsive, and unlawfully hostile that it is rivaled only by the businesses portrayed in the films ‘Boiler Room’ and ‘The Wolf of Wall Street,’” according to a salacious story that graced the back cover of the New York Post last month.
One paragraph of the complaint summarizes the allegedly collaborative scheme like this:
American Funding, Coast to Coast, […] (the “ISO Defendants”) are independent sales organizations (“ISOs”), companies that ostensibly support the merchant cash advance industry by brokering merchant agreements for companies like Plaintiffs. The ISO Defendants are anything but the proverbial “honest brokers.” As alleged below, they have partnered with companies that purport to offer debt relief services to merchants who have agreements with merchant cash advance companies like Plaintiffs. In practice, for these companies, “debt relief” is a code word for deceiving merchants to breach their existing agreements with Plaintiffs and to instead pay fees to these debt relief entities. In short, they scam merchants into believing that they can save them money when, in fact, they leave these merchants in financial shambles, while causing Plaintiffs to suffer millions of dollars in losses and future los[t] profits.
“’DEBT RELIEF’ IS A CODE WORD FOR DECEIVING MERCHANTS TO BREACH THEIR EXISTING AGREEMENTS”
Central to the plaintiffs’ claim is that they have ISO agreements with the defendants and that the defendants’ conduct is a breach of those agreements. The three causes of action alleged are tortious interference with contract, conversion, and breach of contract. Plaintiffs claim that 100 merchants with more than $3 million in outstanding balances are in breach of their contracts because of the defendants’ conduct.
The complaint was prepared and filed by attorneys at Proskauer, a 142-year old law firm founded in New York City.
Debt Relief Under Fire
The small business debt relief industry has been marred by scandal in recent years. In an unrelated criminal matter being handled in the Western District of New York, the owner of Corporate Restructure Inc. (no ties to Corporate Bailout) is currently residing in the Niagara County Jail awaiting trial on charges of conspiracy to commit mail fraud, wire fraud, bank fraud and money laundering for failing to deliver the debt relief services it charged for. In that case, United States vs. Sergiy Bezrukov, Bezrukov advertised that he could reduce a merchant’s short term debt by up to 75%. He is facing up to 30 years in prison. He was also previously a merchant cash advance ISO.
Two other MCA funding companies, Pearl Gamma Funding and Pearl Beta Funding, filed a lawsuit last November against another debt relief company that calls itself Creditors Relief. The complaint in that case also alleges tortious interference with contract and is still pending.
Meanwhile, a lawsuit filed in May by famous TCPA litigant Craig Cunningham against Corporate Bailout and Mark D Guidubaldi & Associates LLC went unanswered, according to court records. Cunningham, who alleged violations of telemarketing laws, filed for a default judgment against Corporate Bailout on September 12th.
Taking Advantage
Both Yellowstone Capital and Everest would not comment on the lawsuit they filed, citing pending litigation. Sources close to them, however, contend that both companies take matters that involve merchants being taken advantage of very seriously.
“When our own ISOs work directly in concert with companies that induce merchants to breach our contracts, that’s a problem,” said one source who did not wish to be named and was speaking generally about the recent introduction of debt relief service companies to the industry. “They’re taking advantage of businesses that can’t afford to be taken advantage of.”
An email sent by deBanked to Mark Mancino early Thursday afternoon, an individually-named defendant alleged to be affiliated with the other defendants, has not yet received a response. This story may be updated if a reply is received.
A COPY OF THE COMPLAINT CAN BE VIEWED HERE.
Funders and Lenders are Relying More on Brokers, Survey Finds
September 27, 2017Business lending and MCA CEOs are not finding it easy to reduce their dependence on brokers, the latest Bryant Park Capital/deBanked survey results suggest. In a past survey conducted in Q4 2015, respondents indicated that an average of 46% of their business came from external sources/ISOs versus internal marketing. 44% of respondents also reported at the time that they expected the percentage of ISO business to decrease while 33% expected it would remain the same.
Nearly two years later, respondents to the latest survey reported that an average of 64% of their business now comes from ISOs/external sources, a significant increase. 62% of those surveyed said they expected that percentage to decrease.
OnDeck, who did not participate in the survey, reported last quarter that 21.1% of their loans were originated through ISOs, brokers and related parties, up from its lowest point in recent years. That accounted for 24.3% of the total dollars loaned for the period.
Confidence in MCA and Online SMB Lending Industry Ticks Up
September 26, 2017The latest industry CEO survey conducted by Bryant Park Capital and deBanked showed that confidence in the continued success of the SMB lending/MCA industry is coming back. Confidence had a hit a low of 73.8% in Q1 of this year, the lowest point since the survey started in 2015. In Q3, the number jumped up to 81.3%.
Confidence in being able to access capital at a reasonable cost to grow ticked up only slightly to 79.9%, up from its lowest point in Q1 this year at 78.7%.
The first quarter of 2016 holds the confidence record since the surveying began. Coincidentally, that period is widely considered to be the peak of the online lending bubble. An April 2016 blog post published during that year’s annual LendIt Conference declared an end to the euphoria.
While respondents to the most recent survey were not asked to explain their confidence level, factors like a steady regulatory climate and some recent competition-reducing consolidation likely played a role in the boost.
Bizfi Survives, Thanks to World Business Lenders Asset Purchase Deal
September 22, 2017
The Bizfi marketplace is slated to live on, according to Stephen Sheinbaum who joined World Business Lenders (WBL) as a managing director in July. On Wednesday, WBL purchased several assets from Bizfi including the brand, the marketplace, the Next Level Funding renewal book, and other related pieces of the company, he says. Sheinbaum founded Bizfi (then Merchant Cash and Capital) in 2005.
WBL, a Jersey City-headquartered small business lender will also be a lender on the platform.
Other key Bizfi personnel have joined WBL including former Managing Director of Renewals John BellaVia, VP of Sales Michael Caronna, and Sales Manager Ryan Bressler.
The asset purchase does not affect the deal forged with Credibly to service the $250 million portfolio, Sheinbaum explains, which is separate.
While lesser known among the mainstream fintech media, WBL has been a stalwart player in the non-bank lending industry for years. Their ambitions and size became more apparent when deBanked attended their invite-only annual shareholder meeting at the Waldorf Astoria in NYC in 2015. The company went on to open a massive office in Jersey City in July 2016 that was attended by Jersey City Deputy Mayor Marcos Vigil, Councilwoman Candice Osborne, Archbishop David Billings and Mitchell Rudin, the CEO of Mack-Cali. At the ceremonial ribbon cutting, WBL CEO Doug Naidus said that he wanted to build a company that lasts, one that he can look back on and be proud of.
Now with the Bizfi brand and marketplace in tow, the company is uniquely positioned.
“[It’s a] game changer here,” Sheinbaum said. “2.0 here we come!”
C-level Credit Exec Leaves Lending Club for Affirm
September 21, 2017Lending Club’s Chief Credit Officer and Interim General Manager, Sandeep Bhandari, has joined fintech lender Affirm, according to Affirm CEO Max Levchin. Levchin posted the following on LinkedIn:
I am excited to announce and welcome Sandeep Bhandari to Affirm, Inc. as Chief Strategy and Risk Officer (CSRO).
Sandeep joins us from Lending Club where he was the Chief Credit Officer (CCO). Prior to Lending Club, he was at Capital One for many years, where he was Assistant Chief Credit Officer at Capital One Bank (Credit Risk Management) and Venture Partner (Capital One Ventures). Prior to that Sandeep held a variety of roles requiring expertise in strategy, credit risk management, marketing, product development, and underwriting across several lines of business including consumer and small business credit card, auto lending, and mortgage and home equity lending.
We are excited for Sandeep to join us for our next phase of rapid growth and to help us fulfill our mission of delivering honest financial products that improve lives.
The move comes on the heels of Lending Club announcing their “most advanced and predictive credit model ever.” Bhandari was responsible for credit strategy and overall credit risk management at Lending Club and presumably would’ve overseen that.
Talkative investors on the LendAcademy forum were not immediately sold on Lending Club’s new system, however. Some users bemoaned that Lending Club is ignoring common sense in favor of data. In one instance, the CEO of PeerCube referenced an interest rate anomaly alleged to be discovered in Lending Club’s pricing as “Data-driven but knowledge-unaware.”
Affirm and Lending Club differ. Whereas Lending Club targets the credit card refinancing market, Affirm helps consumers finance purchases. Last month, Affirm and Walmart were reportedly in talks to offer financing to consumers.
